News Update as @ 1530 hours, Friday 25 July 2014Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

By Lynn Murahwa

Zimbabwe's pharmaceutical industry is buckling under the weight of import costs for raw materials and are facing closure as the impact of cheap imports weigh heavy, Parliamentarians heard today.

The pressures have largely been blamed on a skewed government pro-curement policy that favours imported drugs.

The Pharmaceutical Manufacturers Association (PMA) has requested for policy measures to aid the resuscitation of the pharmaceutical manufacturing industry in the country.

During a Parliamentarians tour of the country's pharmaceuticals companies, Plus Five Pharmaceuticals chief execu-tive Emmanuel Mujuru said with Gov-ernment support the local pharmaceu-

tical companies can be able to supply up to 70 percent of Zimbabwe's drugs needs.

Mujuru is also chairman of the PMA. "We can supply up to 70 percent of the drugs and medicines needed in the country if we could get Government support," he said.

According to Mujuru, the bulk of the challenges being faced by the industry

are based on the country's policies that are affect sustainability of the industry.

"Once the envy of the SADC region, the local pharmaceuticals industry is facing numerous challenges most of which are of a policy nature, that are affect-ing its viability and sustainability which need urgent redress,' he said. "Capac-ity utilisation was down to 20 percent in 2013 from 58 percent in 2012. Imported raw materials and imported

packaging materials are subjected to customs duties and value added tax (VAT)," he said.

He added that the current tax policy had placed the local pharmaceuticals industry at a disadvantage as it had left out left out drugs imports.

"This has created an uneven playing field that gives imported medicines a price advantage by increasing the cost of local production. This policy favours importation of medicines at the expense of local production and there-fore works against some objectives of ZimAsset," Mujuru added.

Speaking on behalf of the Parliamen-tary Portfolio Committee on Indus-try and Commerce chairperson Ray Kaukonde acknowledged the need to improve the country's operating envi-ronment. •

Zim drugs manufacturers lament skewed tax policy

BH24

By Tawanda Musarurwa

Furniture group Pelhams Limited is far from coming out of the woods as the company's loss position for the year ended March 31 2014 worsened to $3,3 million.

That was a 94 percent decline from the prior year loss of $1,7 million.

The company last year indicated that it was in a "transitional phase" after it earlier instituted measures such as realignment of overheads, reloca-tion and closure of non performing branches, research and manufacturing of exclusive lines to increase margins, conclusion of capital raising initiatives for working capital and funding of the debtors book as it sought to return to profitability.

Although the measures had some notable effects. In a statement accom-panying its financial results, company chairperson Tawanda Nyambirai said:

"The closing of branches that were not profitable together with the rationalisa-tion of staff and other expenses con-tributed towards a reduction in admin-istrative expenses and other operating expenses of $899 191 and $416 339

respectively from the prior period.

"The restructuring of expensive debt and loan arrangements together with the reduction in the company's loan secured by a mortgage bond contrib-

uted towards a reduction in finance costs of 41,02 million from the prior year."

But external factors appear to have negated these efforts. Nyambirai out-lined a significant decline in sales of goods:

"Sales of goods for the year declined by 69 percent from a prior year level of $8,36 million to $2,62 million due to a combination of factors which include the company's challenges in stock-ing up its branches and the declining demand for capital goods," he said.

The gross margin relating to the sale of goods stood at 20 percent, a marked decrease from the prior year's margin of 26 percent as demand for big ticket items with higher margins declined.

Finance income on trade receivables declined from a prior year level of $3,08 million to $1,11 million as the old debtors' book matured and was repaid.

Management believes that overheads alignment will be key in returning the company to profitability.

"Overheads spanning beyond people and occupancy costs will have to be continously reviewed in an environ-ment where cash management has become singularly the most important variable in business," said Nyambirai.

In view of the harsh economic envi-ronment that the company was oper-ating in, it could take much longer than anticipated for full benefits of the changes in the company’s strategic focus are realised. •

3 NEWS

Pelhams' loss widens

AdM-DI156506-

BH24

BH24 Reporter

Zimbabwe says it will invest in infra-structure for the hosting of interna-tional events and major conferences as the country gears for MICE tourism.

MICE is the acronym for meetings, incentives, conventions and exhibi-tions/events.

According to the National Tourism Pol-icy that was launched yesterday, the country could soon be having new

MICE facilities. "The Government will invest in and support the development of new MICE facilities and upgrading of existing ones," reads the policy.

In August last year, Zimbabwe suc-cessfully hosted the 20th session of the United Nations World Tourism Organi-sation (UNWTO) General Assembly in Victoria Falls, and Tourism and Hospi-tality Industry Minister Walter Mzembi believes that the country is well-placed to claim a stake of the global MICE market.

Statistics show that the total global MICE market is in excess of $270 bil-lion and that output from this form of tourism accounts for 1 percent of the world’s gross domestic product.

MICE event locations are normally bid on by specialised convention bureaux in particular countries and cities and established for the purpose of bidding on MICE activities.

This process of marketing and bidding is normally conducted well in advance

of the event, often several years, as securing major events can benefit the local economy of the host city or coun-try. To this extent, the country will also be establishing a National Conventions Bureau.

"The Government will establish a National Conventions Bureau to lobby for regional and international confer-ences and will facilitate and support ini-tiations to host conferences in Zimba-bwe," says the National Tourism Policy.

Zimbabwe expects tourism arrivals to reach 2,5 million by year end, and expects arrivals to rise to 3,2 million next year.

Although the tourism policy has been launched, the Ministry of Tourism is yet to promulgate an implementation matrix for the policy.

According to Minister Mzembi, this will come in the form of a Strategic Imple-mentation Plan which will clearly artic-ulate how the policy pronouncements will be translated into action plans incorporating specific timelines and appropriate responsibilities. •

5 NEWS

Zimbabwe to 'build' meetings industry

Minister Mzembi

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BH24

Zimbabwe's state-owned rail company has agreed to borrow $460 million from the Develop-ment Bank of Southern Africa to develop its unprofitable network that relies mainly on rolling stock acquired before independence in 1980.

The loan will be signed within the next week or two, Lewis Mukwada, general manager for National Rail-ways of Zimbabwe, said by phone today. Jacky Mashapu, a spokes-man for the Midrand, South Afri-ca-based DBSA, declined to immediately comment.

“Now the real work starts,” Muk-wada said from Bulawayo, Zimba-bwe’s second-largest city. “This is good news for NRZ.”

The country’s railways require $1.9 billion of investment after freight volumes declined by about two-thirds since 2000 to 3.6 mil-

lion metric tons last year, Muk-wada said July 7. Zimbabwe’s economy has stalled and is threat-ened by deflation after contracting by 40 percent in the eight years following land reform programs that dispossessed white farmers in 2000. ―Bloomberg •

7 NEWS

BH24 Reporter

Estimated revenue of $3,01 million exchanged hands at Mbare Agriculture

Market in the month of May, figures from eMkambo show.

eMkambo is an agriculture market

intelligence organisation. According to eMkambo, the $3 million revenue is a 46,1 percent increase from revenues posted in the prior comparable period.

The above income was generated from 49 produce types sold in the market from various farming areas and dis-tricts around Zimbabwe.

The month of May is significant in Zim-babwean agriculture for two main rea-sons. First of all, May

marks the beginning of winter. Sec-ondly, by May, most field crops are off the land and now at home.

Farmers will now be busy counting their costs and thinking about diversi-fying into other agribusiness

activities.

Experts at eMkambo have urged the Government to spearhead the broad-ening of agricultural market databases.

"Policy makers should devote resources to local market development where the country’s resilience is well expressed. Although local knowledge is being contaminated by various forms of knowledge spill-overs, ordinary people people’s capacity to mobilise solutions stands tall in Zimbabwe," they said. •

$3m exchanged in agro-market in May

Zimbabwe to sign $460m Development Bank loan for railways

BH24

9 miNiNg

BH24 Reporter

Zimbabwe's production last year dipped 14 percent to $538,5 million for 10,41 million carats, data released by the Kimberley Process Certification Scheme (KP) shows.

The country's volume of production also eased 14 percent to 10,411 million carats while the average price dropped 3 percent to $51,72 per carat.

The Government has since instituted a number of measures to boost ben-efits from local diamond production, including streamlining the number of firms currently operating in Marange and banning exports of rough gems for prospective investors.

Zimbabwe's decline came at a time when global diamond production by

value rose 11 percent year on year to $14,09 billion.

By volume, global production increased 2 percent to 130,48 million carats.

The KP said this was attributable to a

rise in the average price of rough dia-monds in the year, which grew by 9 percent to $107,95 per carat.

On the African continent, the value of Botswana’s production rose 22 percent to $3,63 billion with volume up 13 per-

cent to 23,19 million carats to retain its position as the top diamond producer in the world in terms of value.

Namibia's production increased 15 per-cent to $1,36 billion from 1,689 million carats as its average price leaped 46 percent to $805,24 per carat.

It also had the highest priced diamonds in the world overtaking Lesotho where the average price of rough production fell 7 percent to $584,88 per carat.

During the same period, Angola's out-put grew 15 percent to $1,28 billion from 9,36 million carats while its aver-age price rose 2 percent to $136,49 per carat.

South Africa’s output also increased 15 percent to $1,19 billion from 8,143 million carats while the average price of its diamonds was flat at $145,54 per carat.

Globally, Russia was ranked in second place with production up 8 percent to $3,11 billion and output up 8 percent to 37,884 million carats.

Canada’s diamond production fell 5 percent to $1,91 billion but output rose 1 percent to 10,56 million carats. •

Zim diamond output dips 14 percent to 10,4 million carats: KP

BH24

The stock market lost 0.64 percent in today's trades, maintaining a down-ward trend that has the seen the industrial index losing 2.17 points (or 1.17 percent) on a week-on-week basis.

Activity has been generally subdued during the course of the week just

ended. The industrial index closed lower at 183.76 points after shedding 1.19 points as a number of heavy-weight caps lost some ground.

Natfoods retreated 5 cents to trade at 195 cents and Colcom dropped 3 cents to close at 22 cents.Giant tel-ecoms Econet and Meikles both went

down a cent to 72 cents and 16 cents respectively, while Zimplow also went down, losing 0.60 cents to close at 8 cents. Only three industrial counters traded in the positive territory. First Mutual was 0.52 cents higher to close at 5.52 cents, African Sun added 0.10 cents to close at 2.80 cents and ZPI was up 0.01 cents to 0.90 cents.

The mining index added 5.40 points (or 8.83 percent) to close at 66.53 points on the back of a positive per-formance by Bindura, which gained 0.60 cents to close at 5.61 cents.

Falgold, Hwange and Riozim were unchanged at previous trading levels. On a week-on-week basis, the mining index rose 8.70 points (or 15.04 per-cent) ― BH24 Reporter •

11 ZSE REViEW

Equities close week in the red

BH24

Most African companies and firms have failed to rise up because they allocate salaries and benefits to workers based on “labour regulations” rather than the actual output produced by the worker.

“Why should I work extra hard when I know my salary will come at exactly the same amount I negotiated for at the end of the month and also that the employer will find it difficult to chase me away because of tight labour laws” these are the hypothetical sen-timents of one lazy worker.

The move by Government to reform the labour laws has received mixed responses from different stakeholders.

Employers applauded and welcomed the move as they believe it will reduce the labour cost burden that has been weighing down on their production.

On the other hand for the workers the reforms do not seem to favor them much as the initial view was that the labour laws are stringent and tend to favor workers. Which arguably can be true, but for us it is not really about

who is being favored or who is not. It’s about economic growth and develop-ment. Surely it can be agreeable that at this stage in which the economy is at we cannot look at who is in what position but rather on what solution is being offered to come out of this pre-dicament.

If the reformation of the labour laws is a step to improving economic growth and well being then why not reform.

But one most important element

however is that labour laws should be matched with productivity.

This, however, may be difficult to measure for other sectors such as teaching and for the civil servants, but for those sectors were production can be measured against effort it certainly should be applied.

Production should be key, workers actually need to be rational on this matter it is only reasonable that a worker receives what he/she works

for and should put more effort to receive more.

However some may argue that they may be working but their effort is not recognised because of other linked factors that may lead to low produc-tivity, in such a scenario what can be done?

This now becomes the labour experts front to be able to explain how pro-ductivity based remuneration can work out.

Industrial Psychology Consultants, a human resource consultancy company, has been advocating for employers to adopt the productivity based remuneration structures.

This has received wide acceptance and the explanation is that it will promote productivity and cut labour costs.

The company proposed some sci-entific measures that can be used to make this proposal practical and appli-cable. But the critical point here is that the economy needs to grow and peo-ple should be paid for what they have worked for. •

13 BH24 COmmENT

Productivity based remuneration the way to go

BH24

Lonmin Plc said it’s looking at ways to cut expenses as a five-month strike in South Africa crippled third-quarter plat-inum output, reduced sales by 68 per-cent and will raise costs by more than 60 percent for the year.

Lonmin is “assessing our medium- to long-term options around improving the productivity and profitability of our business, including cost reduction,” Chief Executive Officer Ben Magara said in a statement today.

The walkout by more than 70,000 min-ers at Lonmin, Anglo American Plat-inum Ltd. and Impala Platinum Hold-ings Ltd. cost the companies about 24 billion rand ($2.3 billion) in lost output and workers 10.7 billion rand in wages by the time it ended on June 24.

The strike pushed the economy into contraction in the first three months of this year as mining output plunged. South Africa accounts for more than two-thirds of mined production of the metal.

Lonmin reported no output in its third quarter ended June 30. The strike

affected 192,700 platinum saleable ounces in the period, and resulted in the loss of 348,400 ounces in the nine months through June.

All 11 shafts are back in production and the company is operating at about 30 percent of normal monthly output. Lonmin will reach 80 percent of normal production by the end of September

and a full steady state in the first quar-ter of fiscal 2015, it said.

The company reduced its capi-tal-spending forecast to $100 million for the fiscal year ending Sept. 30 from $210 million and sees the unit cost per ounce of platinum group metals pro-duced to be more than 60 percent than a year earlier. This includes costs of

$322 million incurred mainly because of idle production and security costs, it said.

Lonmin forecasts production of 340,000 ounces of metals in concen-trate for the fiscal year, and sales of 420,000 ounces. ― Bloomberg •

15 REgiONAL NEWS

Lonmin seeks cost cuts as strike disrupts sales, lift expenses

BH24

17 DiARY OF EVENTS

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

POWER GENERATION STATSGen Station

14 July 2014

Energy

(Megawatts)

Hwange 511 MW

Kariba 750 MW

Harare 30 MW

Munyati 28 MW

Bulawayo 0 MW

Imports 0 MW

Total 1320 MW

23 -25 July - Mine Entra, Place: Zimbabwe Inter-national Exhibition Centre, Bulawayo

24 July - OK Zimbabwe Thirteenth Annual Gen-eral Meeting Place: OKMart Functions Room, First Floor, OKMart, 30 Chiremba Road, Hillside, Time:

15:00 hours.

1 August - Sixteenth Annual General Meeting of the members of Econet Wireless Zimbabwe Limited, Place: Econet Park, 2 Old Mutare Road, Msasa, Harare, Time; 10.00am

THE BH24 DIARY

BH24

19 ZSE

ZSEMOvERS CHANGE TODAY PRICE USC SHAKERS CHANGE TODAY PRICE USC

BNC 11.97% 5.61 MEDTECH -20.00% 0.04

FIRST MUTUAL 10.40% 5.52 COLCOM -12.00% 22.00

AFRICANSUN 3.70% 2.80 ZIMPLOW -6.97% 8.00

ZPI 1.12% 0.90 MEIKLES -5.88% 16.00

PADENGA -5.76% 7.35

TRUWORTHS -5.00% 2.85

CFI -3.91% 2.21

NATFOODS -2.50% 195.00

ECONET -1.36% 72.00

IndicesINDEx PREvIOUS TODAY MOvE CHANGE

INDUSTRIAL 184.95 183.76 -1.19 POINTS -0.64%

MINING 61.13 66.53 +5.40 POINTS +8.83%

Stocks Exchange

BH24

21 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 2,354.16 -7.26 -0.31% 18June

Kenya 4,896.77 -13.83 -0.28% 21July

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 42,784.30 -107.52 -0.25% 21July

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 185.72 -0.21 -0.11% 21July

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 — "There is only one way To succeed in anyThing, and ThaT is To give iT everyThing." -vince lombardi

Globalshareholder.com

The International Monetary Fund fore-sees the global economy expanding less than it had forecast, slowed by weaker growth in the United States, Russia and developing economies.

The lending organization on Thursday predicted that global growth will be 3.4 percent in 2014, below its April forecast of 3.7 percent. The fund still expects the growth of the world's economy to accel-erate to 4 percent in 2015.

The downgrade of this year's estimate for the global economy reflects much slower growth in the United States. The IMF expects just 1.7 percent U.S. growth in 2014, which would be the weakest since the recession officially ended five years ago.

That's down from its April prediction of 2.8 percent.

The U.S. economy shrank at an annual rate of 2.9 percent in the first three months of the year. ― AP •

Brent crude edged higher above $107 a barrel on Friday, on track to end the week flat as plentiful supplies held down any run-up in prices from geopolitical tensions in oil producing regions. Oil

prices have traded in a tight range this week with robust economic data from the United States, China and the euro zone also failing to push prices higher.

"It is very unusual that big geopolitical events such as Iraq, Ukraine and Gaza, which normally are very sensitive to the price of oil, almost haven't affected prices," said Jonathan Barrett, chief investment officer at Ayers Alliance in Sydney, noting that trading volumes have dropped off. "The only conclusion we can draw is that the world is awash with oil," he said. Brent crude for Sep-

tember delivery traded 24 cents higher at $107.31 a barrel by 0657 GMT. The contract had closed 96 cents lower on Thursday.

U.S crude for September delivery was up 8 cents at $102.15 a barrel, after settling $1.05 lower. Conflicts in Ukraine, Gaza and Iraq raged on, but failed to push prices higher as global supplies remained ample. In Libya, oil production has risen to 500,000 barrels per day, but there is no progress on reopening Brega oil port after an agreement to end a protest there, a spokesman for state-

run National Oil Corporation said. Gazan authorities said Israeli forces shelled a shelter at a U.N.-run school on Thurs-day, killing at least 15 people as the Pal-estinian death toll in the conflict climbed higher than 760 and attempts at a truce remained elusive.

Members of the European Union on Thursday also considered proposals tar-geting state-owned Russian banks vital to Moscow's faltering economy in what would be the most serious sanctions so far over the Ukraine crisis. ― Reuters •

22 iNTERNATiONAL NEWS

Brent holds above $107 as supplies outweigh political tensions

IMF cuts U.S., global growth forecasts for '14

By Ray Mwareya

Contunued from yesterday

The country's laws compel flue-cured tobacco farmers to establish fast grow-ing tree species as replacements. "For-ests have a paramount contribution to make as engines of future sustainable development", says Saviour Kasuku-were, Zimbabwe's water and climate minister.

In 2011 the country's largest replant-ing target was met with 10 million new trees. However there is a doubt how many of the new trees survived due to the wild fires that often accom-

pany tobacco farming. Farmers are also encouraged to grow fast-growing eucalyptus on their own land to pro-vide the wood. But many are reluctant as this would mean giving up land for tobacco cultivation, while the trees are also highly water demanding.

Rocket barns

In an attempt to tackle the problem British American Tobacco has intro-duced what it called a 'rocket barn' - a tobacco drying kitchen that uses 50 percent less firewood by burning only wood harvested from commercial for-ests not natural ones. 'Rocket barns' are more fuel-efficient than traditional

drying barns, and work by using emerging exhaust smoke to draw in dry air. They are insulated with 50 mil-limeters of grass thatch. Its wide chim-ney not only removes smoke from the furnace but also expels moisture from the barn.

Where conventional tobacco barns use 530kg of wood to cure 5 bales of tobacco, a rocket barn uses 290 kg of firewood to cure the same quan-tity according to Zimbabwe's Tobacco Research Board (TRB).

Dahlia Garwe, TRB chief executive, says rocket barns are designed to pro-mote high combustion efficiency mini-mising the release of ozone pollutants to the air, while "quality of cured leaf is improved in rocket barns. Excessive heat from metal pipes in old barns damages the crop's leaves."

They also use small branches and twigs, she adds, "thus making it pos-sible for the farmers to use branches for curing instead of cutting down the while tree." The TRB has distributed 10 000 rocket barns to small scale farmers from 2013 at agricultural shows, field

days and auctions. Statistics show that 60 percent of farmers who received bans adopted them.

But other farmers complain of the cost of rocket barns. They cost $800 to $1 200 with labour and building - ruling it out as an option for under-capitalised farmers including most newly estab-lished tobacco growers.

Also with the widely fluctuating tob-cacco price, farmers feel insecure mak-ing long term investments, even if they have retained the money needed from past profits.

Change, or disaster will follow

Tobacco stands as an unhealthy bal-ancing act for Zimbabwe. It is earn-ing vital dollars in the short term, and bringing welcome prosperity to almost 100,000 farmers including women who have benefitted from the country's land redistribution programme.

But the sector must urgently move to more sustainable pratices, or the long term cost will surely prove disastrous for the country and its people not least its farmers. ― The Ecologist •

23 ANALYSiS

Tobacco - Zimbabwe's forests are going up in smoke