News Update as @ 1530 hours, Friday 13 June 2014Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

By Lynn Murahwa

Stockbrokers on the Zimbabwe Stock Exchange are currently undergoing train-ing on the automated trading system (ATS), an official has said.

Securities and Exchange Commission of Zimbabwe CEO Tafadzwa Chinamo said today that the training marks further progress on the setting up of the ATS on Zimbabwe's capital markets which should be fully operational in six months.

Pakistani trainers who arrived in the coun-try last week have since commenced training stockbrokers on the operations of the ATS. Chinamo was speaking at an Institute for Sustainable Africa (INSAF) Conference this morning. “The first train-ing took place last Friday at Mandel Train-ing Centre and it was well attended. In terms of the presentation those who were

there, the brokers and the institutional investors really found it useful. So that is the first step, what they are going to do is then install the system.

“The guys from Infotech have been here two weeks now. There are five of them and they are very senior people and they take things very seriously. Accord-ing to their timetable it should take six months for us to be fully on, but in that six months they will start with the peo-ple most affected who interact with the

system most," he said. Earlier in March this year, the ZSE announced that it had signed an agreement with Dubai-based Infotech Middle East for the supply and installation of an automated trading sys-tem. Chinamo said the ATS will bring con-venience to traders and investors because of increased security and efficiency.

“It’s a paradigm shift, the fact that you can trade from your office is very key, you can also see all the trades going through and the ease of which these trades are going through is also a big step forward. The security features are big, with this platform you will be able to come down from the seven day ceremony platform to even three days and our aim is two. “You can also talk of even administration of dividends, right now companies do not know if the dividend has gone, checks out but they might be in someone’s drawer for a long time so if you put together the

ATS Central Securities Depository (CSD) you are essentially taking this market to a stage where we should be if we are to be taken seriously.” he said.

Chinamo added that although Zimbabwe presently does not have a coding system in corporate governance however plans are being made to create listing rules in accordance with the law.

“There has been a lot of talk about cor-porate governance that we don’t have coding in this country, it’s true that we don’t have a code in this country but with listing it’s always a choice that a company makes. "So we want through the listing rules to make sure that behavior of com-panies or what’s regulating these compa-nies on the exchange is a high standard. The listing rules are going to become a structural instrument enforceable by law” he said. •

Automated Trading System to be "fully on" in six months: SEC

Mr Chinamo

2 ENERGY

By Tawanda Musarurwa

The Rural Electrification Tariff is set to go up after the Minister of Energy and Power Development called upon the new Rural Electrification Agency board to review the current tariff.

While announcing Zesa boards appointments yesterday, Energy and Power Development Minister Dzikamai highlighted his concerns over the 'low' rural electrification tariff to the new Rural Electrification Agency board.

"The 6 percent levy for rural electrifi-cation is not enough, we hope the new board that is taking over is aware of our concerns," said the Minister. The new REA board is constituted by chairman

Willard Chiwewe and board members including Christinah Moyo, Fungai Samuel Mbetsa, Christopher Shumba, Josphat Jaji, Felix Chikwowo, Midard Khumalo and Cecelia Chitiyo. The chief executive officer is Joshua Mashamba.

It is however expected that the new board will face a public backlash in increasing the rural electricity tariff due to the inefficiency and duplicity of the previous board after it had become involved in loaning activities.

Observers are generally against a tar-iff hike. "It cannot be the new board's first task to raise the rural tariff increase before it even justifies that the current monies being paid in the public are

being utilised the right way," said one observer. Earlier in February this year, Minister Mavhaire dissolved the then REA board and management after they were embroiled in a $4 million scandal whereby they extended to themselves and other connected private citizens loans amounting to close to $4 million.

Minister Mavhaire yesterday called upon the new REA board to re-align to its original mandate. "REA must focus on its mandate...it must drop some of its failed integrated or comprehen-sive development thrusts as it is not a development agency but a Rural Elec-trification Agency," he said.

Meanwhile, the Energy Minister has said the solar energy initiative, which is being championed by the Zimbabwe Power Company and REA, is one of the reasons for an upward increase in the overal electricity tariff rate.

"Whilst we have very high solar radi-ation rates, solar power remains very expensive. The same people that are demanding solar power are the same that will denounce us when electricity tariffs are adjusted on account of using any significant portion of solar power," he said. •

Rural electrification tariff to increase

Minister Mavhaire

3 NEWS

The International Monetary Fund is appointing a resident representative in Zimbabwe for the first time in 10 years as the southern African country seeks to mend relations with the lender.

Christian Beddies is the IMF’s first appointment in Zimbabwe since 2004 when the Washington-based lender closed its office in the country, two officials with knowledge of the situ-ation said, declining to be identified because they aren’t authorised to speak to media on the matter. Beddies has arrived in the country, one of the people said.

The IMF is “finalising the process for appointing a resident representative in Harare,” who should be in place in July, the IMF said, without identifying the appointee.

Zimbabwe has been in default to the IMF since 1999, former Finance Min-ister Tendai Biti said last year. The

government said in March it will make a “token payment” to the IMF as the country works on a program to reduce its debt.

President Robert Mugabe’s govern-ment is trying to spur the recovery of the economy, which shrank by 40 per-cent between 2000 and 2008.

The IMF estimated that the country’s inflation rate reached 500 billion per-cent in 2008 after the seizure of white-owned commercial farms disrupted exports of crops including tobacco and roses.

In 2009 the country abandoned its currency in favor of the dollar and the South African rand to tame inflation. —Bloomberg •

IMF to appoint its first country head for Zimbabwe in a decade

Ms Beddies

BH24 Reporter

Liquid Telecom has completed building its East Africa Fibre Ring which con-nects Kenya, Uganda, Rwanda, Tanza-nia and back into Kenya.

The creation of this first fully redundant regional fibre ring, connecting these countries to each other and the rest of the world ensures that businesses across the East African community now receive continuity of Internet connec-tivity and a much more reliable service.

According to Liquid Telecom, the East Africa Fibre Ring ensures that its cus-tomers in the region will not be affected

by fibre cuts.

"Network outages will no longer cause long periods of down-time when busi-nesses cannot connect to the internet. For the first time, in the event of a fibre cut, internet traffic is automatically and

instantly re-routed around the ring, giving consistently high speeds and continuous uptime for businesses and their customers, ensuring business continuity across the region," said the company in a statement.

Commenting on the development Liq-uid Telecom Group CEO Nic Rudnick said:

“This is a historic service improvement for the people and businesses of east Africa, especially those in Rwanda, Democratic Republic of Congo, Burundi and Uganda, who will not have experi-enced such reliable internet previously.

"This pioneering achievement will add value to east African businesses and enable online trade within the East African community and globally, with

reliable connectivity comparable to anywhere else in the world."

Liquid Telecom has so far invested $20 million in the region.

The new fibre ring forms part of Liq-uid Telecom’s Pan-African fibre net-work, the largest single fibre network on the continent, spanning more than 17,000km across country borders and connecting areas where no fixed net-work has existed before.

Liquid Telecom is one of the leading independent data, voice and IP pro-vider in eastern, central and southern Africa and has operating entities in Botswana, DRC, Kenya, Lesotho, Mau-ritius, Nigeria, Rwanda, South Africa, Uganda, United Kingdom, Zambia and Zimbabwe. •

TECHNOLOGY4

Liquid Telecom connects East Africa

Bindura Nickel Corporation says it expects a higher profit in the second half of its financial year, on the back of the full functionality of the Trojan Mine.

The Trojan nickel Mine resumed selling nickel concentrates in April last years, which pushed BNC to a first half year profit of $3,3 million in the six months to 30 September 2013.

That was from a loss of $7,9 million in the previous year, and the miner now expects that profits for the latest half-year period will be higher as it ramped up production at the Trojan mine dur-

ing the period. "The Board of Bindura Nickel Corporation Limited advises shareholders that based on prelimi-nary unaudited figures, the company’s

taxed profit for the second half of the financial year ended 31 March 2014 is expected to be significantly higher than the first half’s US$3.3 million.

This compares with the loss after tax-ation of $12,9 million recorded in the financial year ended 31 March 2013.

Factors contributing to the improve-ment include the resumption of nickel production from the Company’s Tro-jan Mine and ramp-up to full capac-ity," said company secretary Conrad Mukanganga. The miner’s full year-end results will be announced around 30

June 2014.

Earlier this week, regional mining con-glomerate Mwana Africa which owns 76,3 percent of BNC, said an independ-ent study of an accelerated restart plan for the nickel smelter had been com-pleted. It said restart of the smelter will require $26,5 million and can be completed in the first half of next year.

The restart of the BNC smelter will fur-ther drive the nickel producer's profits, with the mining expecting it to start contributing to cash flows in 2016. •

5 NEWS

BNC expects higher profits in H2

Powerspeed revenues, profits up BH24 Reporter

Listed electrical engineering and retail concern Powerspeed Electrical's reve-nues for the six months ended March 31, 2014 were 9 percent up from the prior year as profits also bumped.

Revenue for the period was up 9 per-cent to $16,5 million while earnings before interest rose sustainably to $842 000 from $620 000 prior year

comparative. Profit before tax was up 80 percent to $553 000 as interest declined to $288 000.

"Although borrowing levels fluctu-ate continuously, there has been an increase in borrowings to fund stock in line with the expansion programme.

"This process is carefully managed to ensure that any increase in borrow-ings results in a substantial increase in

return on capital," said management in a statement. In terms of its operations, the company said trading now consti-tutes the bulk of the group's business operations and is now directing most resources to retail division.

" We have continued to expand the Electrosales Hardware brand by increasing the number of branches, the size of the branches and the range of products on offer," said Powerspeed.

On the other hand, although Power-speed's engineering operations con-tributed to profits during the period under review, the "contribution has become even less significant in the overall picture," said the company.

The Powerspeed board has not declared a dividend for the half-year just ended on the basis of the need to fund the business. •

BH24

The equities market today went up a marginal 0.17 percent as trades were largely depressed.

The industrial index was up 0.31 points to close at 180.74 points.

There were gains in Natfoods, which added 5 cents to close at 215 cents, and giant insurer Old Mutual which added 1.40 cents to 250.50 cents. Tel-ecoms giant Econet pushed up 0.59 cents to 72 cents.

Powerspeed was the only loser today, losing 0.02 cents to settle at 1.50 cents after the company announced its six months interims to March 31, 2014. The company's revenue for the period was up 9 percent to $16,5 million while earnings before interest rose sustaina-bly to $842 000 from $620 000 prior

year comparative. Profit before tax was up 80 percent to $553 000 as interest declined to $288 000.

On a week-on-week basis, the indus-trial index gained 2.16 points (or 1.21 points). The mining index added 0.90 points (2.03 percent) to close at 45.17 points as Bindura maintained a positive

streak, gaining 0.10 cents to trade at 3.30 cents.

Falgold, Hwange and Riozim all main-tained previous trading levels.

Week on week mining index was up 6.48 points (or 16.75 percent). — BH24 Reporter •

7 ZSE REVIEW

Equities in marginal gain amidst low trades

ZESA's new boards need to hit the ground running, never mind who con-stitutes the various boards.

Never mind too, the fact that ZESA has too many separate units - 10 in all, including the new Kariba Hydro Power Company.

Zimbabwe has been facing crippling power shortages for the better part of the new millennium - that is, almost a decade and a half now.

Despite having the same problems for so many years, there has not been any improvement in electricity supply in the country. And that only points to one thing: inefficiencies and ineffectiveness on the part of previous boards.

The new boards must therefore play their roles much more effectively.

It starts by them having a full appreci-ation of their key mandates. Basically, the essential function of each of these boards is to superintend over a given enterprise or parastatal. The board must give the enterprise or parastatal policy guidance and oversee or super-vise the implementation of relevant projects and programmes on a part time basis.

Two key issues here. First, the new boards need to give the enterprises the "right direction". A simple case of mis-direction was the Rural Electrification Agency (REA) which had turned itself into some sort of a lender or develop-ment bank under the previous board.

Second, the fact of being a board member is not a full-time job. The new boards members should not see themselves as now in positions that is of benefit to them. Their role is to make sure that ZESA operates effi-ciently and effectively for the greater good of Zimbabwe. The Government is currently in the process of imple-menting the country's newest eco-nomic blueprint - the ZimAsset. And for ZimAsset to succeed, there is need for electricity to drive industry. Energy and Power Development Minister Dzika-

mai Mavhaire got it succinctly correct in his address to the members of the various boards:"Without energy in its various forms, there can never be any transfromation. Such is the criticallity of our mandate. In other words, we must take the lead in availing various energy services in adequate measures.

"Put differently, we must recover from

our current power deficit situation to a power surpulus situation in the short-est possible time. Only then can agri-culture, industry, commerce, mining, etcetera, take off," he said.

Basically, all the ZESA units have seri-ous issues that need to be addressed. The new ZESA boards need to give direction. •

8 BH24 COMMENT

New ZESA boards need to hit the ground running

enjoy the CAIO ride!

South Africa's rand weakened against the dollar early on Friday after Fitch ratings agency changed the outlook for Africa's most advanced economy to negative from stable.

Fitch said it was concerned mainly about poor prospects for economic growth and rising public debt. The agency kept its rating at BBB.

The rand fell to a session low of 10.7230 to the dollar, while government bonds gave up 7 basis points to 8.435 percent on the benchmark 2026 issue and fell 6 basis points to 6.745 percent on the 2015 note. The biggest risk to South Africa's growth is a crippling five month strike in the platinum sector, which saw GDP contract in the first quarter of the year, although there are signs the strike could soon come to an end.

Standard & Poor's, Fitch and Moody's all last downgraded Pretoria in the aftermath of another wave of violent labour protests in 2012, which culmi-nated in police shooting dead more than 30 striking miners.

S&P is due to give its rating review later on Friday and Barclays believes the company, which already has South

Africa on negative outlook, will down-grade the credit rating.

"If South Africa avoids a downgrade, we expect the rand to head back to 10.30/dollar. On the other hand, the rand could weaken towards the 11.00/dollar depending on the severity of the downgrade." — Reuters •

9 REGIONAL NEWS

South Africa's rand, govt bonds fall after Fitch rating review

Kenya sees 20.6 percent lift to GDP in rebase

Kenya expects the size of its economy to go up by 20.6 percent when it com-pletes the process of changing the base year for computing output, the finance ministry said.

The work of rebasing the economy to

2009 from 2001 will be completed by the end of this year, the Treasury said in the prospectus for its debut Eurobond for up to $2 billion.

"Initial estimates for the revised GDP estimate for 2009 is 486.6 billion shil-

lings higher than previous estimates, this represents a 20.6 percent increase in the level of GDP previously reported,” the ministry said.

Kenya is marketing its bond to inves-tors abroad.

Other African nations that have revised the year they use as a base to calculate output include Nigeria, which vaulted to the top of African economies by size earlier this year after it finished the exercise.― Reuters

10 DIARY OF EVENTS

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

POWER GENERATION STATSGen Station

13 June 2014

Energy

(Megawatts)

Hwange 468 MW

Kariba 750 MW

Harare 45 MW

Munyati 32 MW

Bulawayo 20 MW

Imports 50 MW

Total 1364 MW

13 June 2014 - Securities and Exchange Commission of Zimbabwe 2nd Shareholders Forum & Responsible Investing in Zimbabwe Conference 2014 Place : Cresta Lodge, Harare, Time : 8am -2pm

26 June - Masimba Holdings Limited Thirty-Ninth Annual General Meeting of Members for the period ended 31 December 2013, Place: 44 Tilbury Road, Willowvale, Harare, Zimbabwe, Time: 12:00

THE BH24 DIARY

BH24

12 ZSE

ZSEMOvERS CHANGE TODAY PRICE USC SHAKERS CHANGE TODAY PRICE USC

BNC 3.13% 3.30 POWERSPEED -1.32% 1.50

NATFOODS 2.38% 215.00

ECONET 0.83% 72.00

OLD MUTUAL 0.56% 250.50

Indices

INDEx PREvIOUS TODAY MOvE CHANGE

INDUSTRIAL 179.02 180.43 +1.41 POINTS +0.79%

MINING 43.12 44.27 +1.15 POINTS +2.67%

Stocks Exchange

13 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 2,343.98 +9.46 +0.41% 06June

Kenya 4,881.56 +12.30 +0.25% 06June

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 41,529.11 -40.98 -0.10% 06June

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 178.58 +1.54 +0.87% 06June

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 —"The hisTory of The world is The hisTo-ry of a few people who had faiTh in Themselves." - swa-mi vivekananda

Globalshareholder.com

The International Energy Agency said Friday Iraqi oil supplies aren’t at imme-diate risk, though the return of oil exports from the country’s north look increasingly elusive.

The oil market has been focused on events in Iraq since Islamist militants seized control of the northern city of Mosul Tuesday. Crude prices shot higher this week, climbing to their highest level since September as news emerged that the militants had made rapid gains across northern Iraq, rais-ing concerns about oil supply.

Iraqi oil supply is crucial to meet-ing growing global oil demand in the coming years, with the IEA predicting roughly 60% of the growth in oil pro-duction capacity from the Organization of the Petroleum Exporting Countries in the next decade will come from Iraq.

However, in its closely watched oil mar-ket report, the IEA said that provided the conflict in Iraq doesn’t spread fur-ther, it is unlikely to put additional oil supplies at risk.

Iraq hasn’t exported any oil from its

north since March due to repeated attacks on its pipeline to Turkey, but the bulk of its oil production is concentrated in the far south of the country and has been on the rise in recent months.

The turmoil in Iraq adds to the chal-lenges already facing OPEC as it con-tends with chronic supply disruptions in several of its members. Political unrest in Libya has cut the country’s oil

output to a fraction of its pre-civil war levels and Iranian output remains con-strained by western sanctions.

Until now, the supply disruptions have been offset by record growth in non-OPEC supply, but the IEA said pressure on OPEC to pump more oil will ratchet up in the second half of the year.

The Paris-based energy watchdog increased its forecast for the demand

for OPEC’s oil in the second half of the year by 150,000 barrels a day to 30.9 million barrels a day, nearly 1 million barrels a day more than the oil cartel produced in May.

In its semi-annual meeting in Vienna earlier this week, the producer group elected to keep its oil output quota unchanged at 30 million barrels a day. — MarketWatch •

14 INTERNATIONAL NEWS

No immediate risk to Iraq’s oil supplies: IEA

The European Union has served notice that senior bondholders will be in the firing line for losses when banks go bust, yet the law’s fine print leaves room for confusion.

Policy makers from Michel Barnier to Jeroen Dijsselbloem have heralded legislation published yesterday as an iron-clad system for shifting the bur-den of bank failures from taxpayers to investors. In time of crisis, the direc-tive’s exemptions and caveats give regulators plenty of wiggle room, ana-lysts say.

“Unfortunately both for the institutions concerned and the broader needs of a fully functioning financial system, a considerable degree of uncertainty will persist,” Richard Reid, a research fellow for finance and regulation at the Uni-versity of Dundee in Scotland, said by e-mail. “Experience has taught us that when rules such as these are put to the test, it is seldom as straightforward as planned.”

Under the new rules set out in the Bank Recovery and Resolution Direc-tive, starting in 2016 authorities will, as

a general rule, require 8 percent of a struggling bank’s liabilities to be wiped out before recourse can be made to industry funds or taxpayer support.

Ordinary shareholders would face losses first. If that’s not enough, hold-ers of other instruments that count as capital, such as preferred shares and junior bonds, and then senior unse-

cured creditors would be targeted.

‘Toughest’ Rules

Creditors will be protected from suf-fering losses heavier than those they would have incurred had the bank been put through normal insolvency proceedings. Special arrangements would apply for bank depositors, with

holdings of as much as 100,000 euros ($136,000) shielded from writedowns.

Barnier, the EU’s financial services chief, has said that the BRRD is the corner-stone of the EU’s response to the 1.5 trillion euros of taxpayer money gov-ernments made available to prop up their banks between 2008 and 2012.

15 ANALYSIS

New EU Bank-Creditor Loss Rules Leave Room for Confusion

“The new EU rules are one of the world’s toughest in terms of imposing losses on banks’ shareholders and creditors,” Barnier said last month. “This is not business as usual; this is a new world of dealing with failing banks.”

The legislation interlocks with other post-crisis laws published today, includ-ing a toughening of rules on national guarantees for bank deposits and stricter regulation of traders.

The measures also underpin a push by the euro area to centralize the handling of failing banks by establishing a cen-tral resolution authority backed by a joint industry-financed 55 billion-euro fund.

Forced Losses

While the message from governments and regulators is clear-cut, the BRRD itself is nuanced. For example, the law allows nations some scope to provide so-called precautionary aid to banks without triggering a risk of senior bond-holder losses.

Such aid could be applied in cases where a bank is found in a stress test to need more capital.

Regulators can grant exceptions from forced losses if they considered that writing down a class of securities would do more harm than good.

Limits here would include that exemp-tions for some creditors shouldn’t lead to writedowns for others that go beyond the losses they would have faced if the bank went through a tradi-tional bankruptcy procedure.

The European Commission would also have powers to vet such carve-outs.

When exemptions are used, the EU’s state-aid rules, which require bail-ins of junior creditors before public money is used, would still apply.

‘Explicit Inclusion’

“The risk for senior bondholders has very much increased,” said Car-ola Schuler, a managing director for Moody’s Investors Service in Frankfurt. “Still, the law is drafted in a way which means that, within certain parameters, certain conditions, the governments could still step in.”

Moody’s said last month that the leg-islation, with its “explicit inclusion” of writedowns of senior unsecured

creditors, had prompted it to place 82 European banks on a negative ratings outlook.

The application of the rules will need to be kept under review, Moody’s said, as it left “some latitude for authorities” to avoid bailing-in senior creditors when this would threaten financial stability.

“The directive includes several carve-outs that leave open the possibility to implement a resolution that includes support for creditors,” Schuler said. “We don’t have full clarity yet on what this means in practice.”

Capital Cushions

The approach to banks in crisis has varied since the crisis erupted in 2008, with seniors spared at nationalized SNS Reaal NV in Netherlands and at Irish banks, while being targeted as part of the euro area’s bailout of Cyprus in 2013. Seniors also took at hit when two Danish banks failed in 2011 and were processed under national resolution rules.

In addition to possible loopholes in the rules, seniors are also protected by banks’ growing cushions of capital and junior debt.

Banks “are issuing less unsecured sen-ior debt as they focus on increasing deposits and shrinking balance sheets. Its importance is waning,” said Steve Hussey, an analyst at AllianceBernstein Ltd. in London, which manages about $445 billion.

“They are also taking big strides to increase the size of their cushions of equity capital, Additional Tier 1 instru-ments like CoCo bonds and subordi-nated debt that would offer a buffer to senior creditors from losses in a crisis.”

Since 2009, banks including Barclays Plc (BARC), Lloyds Banking Group Plc, and UBS AG have issues CoCos, a term used to describe bonds that are specifically designed to convert into ordinary shares when a bank’s capital, a measure of the state of its finances, breaches a pre-agreed level.

“Given these changes, you would need to have a massive overnight event, a Kerviel, plus a London Whale, plus more besides, to get to a point where senior unsecured debt might be tak-ing a loss,” Hussey said, in reference to trading scandals that have hit Soci-ete Generale SA (GLE) and JPMorgan Chase and Co. - Bloomberg •

16 ANALYSIS