zimbabwe productivity issues - john robertson

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SYSTEMSCONFERENCE

Presentation by John Robertson

CONSUMER PRICE INDEX Re-based: December 2008 = 100

88

92

96

100

104D

ec Jan

Feb

Mar

Apr

May

Jun

Jul

Aug Se

p

Oct

Nov Dec Jan

Feb

IND

EX: D

ec 2

008=

100

US DOLLAR PRICES

Robertson Economic Information Services

ALL ITEMS INDEX

-0,7%

CONSUMER PRICE INDEX Re-based: December 2008 = 100

88

92

96

100

104D

ec Jan

Feb

Mar

Apr

May

Jun

Jul

Aug Se

p

Oct

Nov Dec Jan

Feb

Mar

IND

EX: D

ec 2

008=

100

US DOLLAR PRICES


ALL ITEMS INDEX

+3,5%

7,0

7,5

8,0

8,5

9,0

9,5

RA

ND

PER

U.S

. DO

LLA

R


RAND PER U.S. DOLLARApril 1 2009 to April 23 2010

| Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Jan | Feb | Mar | Apr

2009 | 2010

==

EXCHANGE RATE INDEX Base: Feb 25 2010=100: Y, R, £ & C per US$

90

95

100

105

INDE

X: F

EB 2

5 20

10=1

00

RAND

EURO

POUND

YEN


US$

FEB MARCH APRIL

020406080

100120140160

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Maize Wheat Tobacco Cotton Soya beans Tea Coffee Citrus Sugar Dairy Beef

AGRICULTUREProduction Volume Indices: 2000=100

SUGARCOTTONTEACITRUSDAIRYBEEFSOYAMAIZETOBACCOCOFFEEWHEAT

IND

EX: 2

0 00

= 1 0

0

MINING PRODUCTION BASE METAL & MINERAL ORES

0100 000200 000300 000400 000500 000600 000700 000800 000900 000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Asbestos Chrome Ore Iron Ore Lithium minerals Nickel Phosphate

TON

NES


0

20

40

60

80

100

120

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

MANUFACTURING MANUFACTURING All GroupsAll Groups Annual IndicesAnnual Indices

IND

EX: 1

990

= 1

00


- 82%

0

50

100

150

200

250

2008 2009

MANUFACTURING EXPORTSUS$ Value of Annual Shipments

US$

’mil l

ions

pe r

yea

r


EMPLOYMENT: AGRICULTURE

0

50

100

150

200

250

300

350

40019

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Thou

sand

s of

Em

plo y

ees

EMPLOYMENT: MINING

0

10

20

30

40

50

60

7019

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008


Thou

sand

s of

Em

plo y

ees

MINING PRODUCTION PLATINUM

01 0002 0003 0004 0005 0006 0007 000

2001 2002 2003 2004 2005 2006 2007 2008 2009Robertson Economic Information Services

KIL

OG

RA

MS

GOLD PRODUCTION VOLUMES

05 000

10 00015 00020 00025 00030 000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009


KIL

OG

RA

MS

PER

YEA

R LOWEST ANNUALOUTPUT

SINCEPRE-1907

MINING PRODUCTION NICKEL

0

2 000

4 000

6 000

8 000

10 000

12 000

2001

2002

2003

2004

2005

2006

2007

2008

2009

TON

NES

PER

YEA

R


MINING EXPORT REVENUES US$’ millions

0

200

400

600

800

1000

2007 2008 2009

US$

’mill

ions


0200400600800

1 0001 2001 4001 6001 800

2007 2008 2009

TOTAL EXPORTSUS$ Value of Annual Shipments

US $

’mil l

ions

pe r

yea

r


EMPLOYMENT: MANUFACTURING

0

50

100

150

200

25019

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008


Thou

sand

s of

Em

plo y

ees

EMPLOYMENT: CONSTRUCTION

0102030405060708090

10019

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008


Thou

sand

s of

Em

plo y

ees

EMPLOYMENT: DISTRIBUTION, HOTELS & TOURISM

0

20

40

60

80

100

12019

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2005

2007

2009


Thou

sand

s of

Em

plo y

ees

0

200

400

600

800

1 000

1 200

1 40019

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

TOTAL FORMAL EMPLOYMENTAnnual Averages

Robertson Economic Information Services *Estimates

LOWESTFIGURESINCE

1970

Thou

sand

s of

Em

plo y

ees

BALANCE OF PAYMENTS2010 Projections

0,00,51,01,52,02,53,03,5

IMPORTS

Billi

ons

of U

S do

llars

EXPORTS

Source: Ministry of Finance

BALANCE OF PAYMENTS2010 Projections

0,00,51,01,52,02,53,03,5

IMPORTS$3,4 billion

Billi

ons

of U

S do

llars

EXPORTS$1,9 billion

Source: Ministry of Finance

$1,5 billion B of P Gap

HOURLY WAGE COMPARISONS

0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50

BRAZILCHINAINDIA

INDONESIAMALAWI

MALAYSIAPAKISTAN

PHILIPPINESTHAILAND

VIETNAMZAMBIA

ZIMBABWE

US$ per Hour


0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50

BRAZILCHINAINDIA

INDONESIAMALAWI

MALAYSIAPAKISTAN

PHILIPPINESTHAILAND

VIETNAMZAMBIA

ZIMBABWE

US$ per Hour

US$ per hour now demanded

GOVERNMENT WAGE BILL2010 = 64% of Revenue

0

500

1000

1500

TOTALBUDGETREVENUE GOVT.

WAGEBILLU

S$ ’b

illio

ns

MINISTRY OF FINANCE INTENTIONS:

• Public sector wages must be cut from 18% to 8% of GDP•Public sector wages must be cut from almost 70% of Tax Revenue to below 30%• Public sector wages are therefore capped at current levels

Zimbabwe’s Total Populationand Formal Sector Employment

0

20

40

60

80

100

120

14019

91

1993

1995

1997

1999

2001

2003

2005

2007

2009

IND

EX: 1

991

= 1

00


POPULATION

EMPLOYMENT

Zimbabwe’s Dependency Ratio -Formal Employment:Population

02468

10121416

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

DEP

END

ENTS

PER

EM

PLO

YEE


DEPENDENTS PER

FORMAL SECTOR EMPLOYEE

ZIMBABWE:GDP ANNUAL % CHANGE

-15

-10

-5

0

5

10

15

Year

-on-

Year

Gro

wth

%

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Source: CSO + IMF + Robertson Forecasts

LANDREFORM

GROSS DOMESTIC PRODUCTUS$ per year per person

0100200300400500600700800900

1000

GD

P pe

r Cap

ita in

US $

1980

19

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

06

One US dollara day level



0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50

BRAZILCHINAINDIA

INDONESIAMALAWI

MALAYSIAPAKISTAN

PHILIPPINESTHAILAND

VIETNAMZAMBIA

ZIMBABWE

US$ per Hour

US$ per hour now demanded

TOTAL DEPOSIT BASEheld by 26 banking institutions

in Zimbabwe on January 10 2010:

US$1 406 374 232


• Botswana US$5 666 000 000• Mozambique US$3 418 000 000• Tanzania US$5 476 000 000• Zambia US$2 680 000 000• Zimbabwe US$1 406 000 000

TOTAL DEPOSIT BASEheld by banking institutions

in regional countries 4th Quarter 2009:


BANK DEPOSITS COMPARED

0

1

2

3

4

NU

MBE

R O

F TI

MES

NEI

GH

BOU

RS’

BAN

K D

EPO

SITS

EXC

EED

ZI

MBA

BWE’

S BA

NK

DEP

OSI

TS

Bots

wan

a

Moz

ambi

que

Tan z

ania

Zam

bia Zim

babw

e

PRODUCTION COSTS PER UNITSecure Starting Position

0

25

50

75

100

125

150

50 100 150 200 250UNITS PRODUCED & SOLD

$ C

OS T

S P E

R U

NI T

COSTING STUDYSecure Starting Position

02 0004 0006 0008 000

10 00012 00014 00016 000

0 50 100 150 200 250

Fixed overheadsSales @ $50 per unitVariable costs + fixed costs

FIXEDCOSTS

FIXEDPLUSVARIABLECOSTS

CO

STS

& R

EVEN

UE

$’ 0

00

UNITS PRODUCED & SOLD

PROFIT

BREAK-EVEN

PRODUCTION COSTS PER UNIT Overhead Costs Doubled

0

25

50

75

100

125

150


$ C

OS T

S P E

R U

NI T

COSTING STUDYOverhead Costs Doubled

02 0004 0006 0008 000

10 00012 00014 00016 000

0 50 100 150 200 250


FIXEDCOSTS


CO

STS

& R

EVEN

UE

$’ 0

00


PROFIT

BREAK-EVEN

PRODUCTION COSTS PER UNIT Overhead + Variable Costs Doubled

0

25

50

75

100

125

150


$ C

OS T

S P E

R U

NI T

COSTING STUDYOverhead + Variable Costs Doubled

0

4 000

8 000

12 000

16 000

20 000

0 50 100 150 200 250


FIXEDCOSTS


CO

STS

& R

EVEN

UE

$’ 0

00


LOSS

COSTING STUDYCosts Doubled, Price up 32%

0

4 000

8 000

12 000

16 000

20 000

0 50 100 150 200 250


FIXEDCOSTS


CO

STS

& R

EVEN

UE

$’ 0

00


BREAK-EVEN

COSTING STUDYCosts Doubled, Selling Price up 50%

04 0008 000

12 00016 00020 00024 00028 000

0 50 100 150 200 250


FIXEDCOSTS


CO

STS

& R

EVEN

UE

$’ 0

00


BREAK-EVEN

PROFIT

COSTING STUDYCosts & Selling Price Doubled

04 0008 000

12 00016 00020 00024 00028 000

0 50 100 150 200 250


FIXEDCOSTS


CO

STS

& R

EVEN

UE

$’ 0

00


BREAK-EVEN

PROFIT

WHERE DOES THE DOLLAR GO?

0%

20%

40%

60%

80%

100%

Sale Price

SALE

PRI

CE TOTAL SELLING

PRICE


0%

20%

40%

60%

80%

100%

Sale Price Less Tax

Cost Price

50% Markup

SALE

PRI

CE


0%

20%

40%

60%

80%

100%

Cost Price –NEEDED TO

REPLACE STOCK

Markup has to cover all costs

SALE

PRI

CE

VAT

PRICE PAID BY CUSTOMER


0%

20%

40%

60%

80%

100%

Markup

MAR

KUP WHAT HAPPENSTO THE

MARKUP?


0%

20%

40%

60%

80%

100%

Markup

MAR

KUP

WAGES


0%

20%

40%

60%

80%

100%

Markup

MAR

KUP WAGESRENT


0%

20%

40%

60%

80%

100%

Markup

MAR

KUP

WAGESRENT

UTILITIES


0%

20%

40%

60%

80%

100%

Markup

MAR

KUP

WAGESRENT

UTILITIESMAINTENANCE


0%

20%

40%

60%

80%

100%

Markup

MAR

KUP

WAGESRENT


FINANCE


0%

20%

40%

60%

80%

100%

Markup

MAR

KUP NO PROFIT UNLESS

COSTS CAN BE CUT


0%

20%

40%

60%

80%

100%

Markup

MAR

KUP

WAGESRENT


FINANCEPROFIT


0%

20%

40%

60%

80%

100%

MAR

KUP WAGES

RENTUTILITIES

MAINTENANCEFINANCE

50% wage increase would eliminate profit

Up 50%


-20%

0%

20%

40%

60%

80%

100%

MAR

KUP

100% wage increase would generate LOSS and might destroy the company

Up 100%

WAGESRENT


FINANCELOSS

Noting the inflexibility of the labour market, the Minister intends to:• Review labour laws• Restore flexibility to the labour market• Ensure wages are within the capacity of the economy

MINISTRY OF FINANCE INTENTIONS:

zimbabwe productivity issues - john robertson

Economy & Finance