The Sunday News
Economic Focus Gabriel Masvora
FINALLY Government through the Reserve Bank of Zimbabwe has brought finality to the issue of the Zim dollar that was stashed in people’s accounts since 2009 when the country migrated to the use of foreign currency. Central bank governor Dr John Mangudya announced on Wednesday that all the Zim dollar accounts will be demonetised through a $20 million facility which will see account holders getting a flat $5 for each account.
I am not going to start debating whether the $5 was the fair amount to compensate the account holders.
Value aside, we must be happy as a nation because now we can safely look forward as the issue of Zim dollar is done and buried.
It is like in any situation even death occurs, it’s painful but a proper burial always brings some finality and allows the living to move on with life.
Likewise the finality over the issue of the quintillions and zillions is over and it is time to move on.
However, good as it might be, there are issues which the central bank has to address before they start distributing the $5.
First it is common knowledge that most Zim dollar account holders even those that are still banking have changed banking institutions.
Following dollarisation most people who opened accounts preferred to use completely new banks from the ones they were using during the Zim dollar era.
Why? Maybe just to run away from the memories of what they experienced with the bank during the Zim dollar account.
This means that most people who are supposed to get the $5 no longer hold accounts with these banks.
Which raises the question on how the $5 will get to the people. We all know the vulture tendencies of our banks. They are already scratching their palms to get a share of the $20 million.
I am not sure how the central bank will solve this issue. First the banks cannot force individuals to open accounts so that they can withdraw $5.
After all for some banks it costs more than $5 to open an account. Few people would be prepared to spend say $10 so that they can withdraw $5.
Even if the central bank commands banks to give out the money even to non-account holders we know our financial institutions would not do that for free.
Obviously they will want a chunk of the $5. So the question that many will ask is how much of the paltry $5 will end up in the account holders’ pockets.
If by any chance banks come with some requirements that will cut the money even by a cent how many people will bother to go and queue for the money.
Well we are waiting for the central bank to give us the guidelines but already people have started talking.
While the idea of giving out $5 to each account holder is noble some are suggesting if channelling the $20 million to the productive sector was going to be a better option.
Someone said the Distressed Industries and Marginalised Areas Fund, which was supposed to be a $40 million fund did not make an impact after Government failed to honour its $20 million part. He argued why not just put the $20 million they want to give out to people to help ailing companies.
The benefits of a healthy economy will surely outweigh just giving $5 to a public which will always complain that it is not enough after all.
After all they argue, many people had resigned to the fact that they were not expecting to get anything from those locked zillions.
Well Zimbabwe is full of literate people and you can never run out of ideas but let us wait and see how the money will get to the account holders’ pockets.
Enough of the $5 let us look at some ways of how we can improve our investments courtesy of the Zimbabwe Shareholders Association
Forces that Divide investors from their investments
There are principally three separate but linked causes for this worrying trend for shareholders to become more remote from the companies in which they invest:
The pressure to purchase shares through nominee accounts where shareholders have no direct influence.
The use of collective indirect investment vehicles such as unit trusts and investment trusts, in ignorance of their true cost and the lack of potential influence that gives over those investments and the growing promotion of derivative mechanisms such as spread betting.
Nominee Accounts are a cheap means of purchasing an interest in an attractive company, but they separate investors from companies they are invested in, entitling them to few if any company documents, with no right or even opportunity to attend and vote at company meetings except by the leave of some financial intermediary. Some companies (particularly investment trusts) do make special arrangements to overcome these disadvantages, but these are usually companies that perform satisfactorily anyway.
Nominee accounts are attractive for the intermediaries, because they lead to lower costs and sometimes allow them to make a continuing return rather than a one-off commission, but they damage the prospect of improved corporate governance because they make investors remote from the companies in which they invest. In consequence they usually find it difficult to gather data on their performance, let alone have a beneficial influence on developing policies and strategies.
Collective Investment Vehicles can be a useful way for the small investor to achieve diversification, thus reducing investment risk. Some investment trusts, too are exemplary in inviting and paying attention to the views of their shareholders on fund allocation. These give informative and frank presentations at AGMs, and issue regular commentaries on their investment thinking and activities through websites. However, other collectives communicate with their investors with caution bordering on contempt (apart from regular invitation to sink more money in their funds either directly or through the annual ISA allowance)
Spread Betting and Other Derivatives are attractive to those who see public companies as no more than symbols on a screen, rather than an opportunity to participate in real businesses with real employees and real customers. They lead investors into a mind-set which is quite remote from any potentially beneficial effect arising from long term investment performance, yet engender what are very often false hopes of making a fortune at the risk of losing one.
So the situation is, in the words of Anthony Powell, ‘‘capable of considerable improvement before being regarded as in the least satisfactory,’’ how can such improvement be brought about? Piecemeal measures could ameliorate certain aspects of the situation, but we believe there should be a co-ordinated series of measures directed to establish an investment environment that would enable individual shareholders to exert a positive influence on the companies in which they invest.
Zimbabwe Shareholders Association endeavours to promote responsible investing for the Individual and the Society. To get in touch with them email to [email protected] <mailto:[email protected]> or Skype: zimshareholders.
