Spotlight on Zimbabwe

First Compensation Payment to White Farmers

Zimbabwe has paid its first installment of USD1m of the compensation payment it committed to making to white farmers last year. The money has been paid as a shareholder dividend from the Kuvimba Mining House. The former landowners were allocated a 12.5% share of the company. The mining company has successfully turned around a number of gold mines under its ownership but still has some way to go in bringing all its mines into full operation.

If the business continues to improve, it is possible that it will be able to finance further, larger payments - possibly through a combination of dividend payments and a bond issuance. This is particularly pertinent because the total compensation package is USD3.5bn. So if this first USD1m installment represents an annual payment; at this rate it will take 3,500 years to pay. If, on the other hand, the country pays at a rate of USD1m every single day day it will take about 9½ years.

No US Dollar Ban

Central bank Governor, John Mangudya has dismissed rumours of a ban on the use of foreign currency in formal transactions. “We want to encourage formal businesses to continue to accept payment in foreign currency so that foreign currency continues to circulate and come through normal channels,” the central bank chief said.

Dr Mangudya has forecast Zimbabwe’s inflation to continue falling rapidly, anchored by monetary and fiscal discipline, and especially after an overly good rainy season that ensured the bumper harvest this year. The sharp drop in the rate of inflation, amid more stable and predictable pricing, could - according to some optimistic analysts - see the annual inflation rate fall to below 55 percent by end of next month and drop even further by year end.

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None of the information in this article is, nor should be construed as, financial advice. All foreign exchange transactions involve risk and you should always seek your own independent financial advice before entering into any foreign exchange transaction.