Vol. 25 No. 29


Week Ending
21st July 2023
Weekly Economic
Highlights
TABLE OF CONTENTS


GREEDFLATION AND IMPLICATIONS ON DOMESTIC


1.
OVERVIEW

This report provides an analysis of the developments in the money and capital markets for the
week ending 21st July 2023. The report also covers developments in the tobacco, mineral
commodities, and stock markets during the week. The last section of the report presents a review
of Greedflation and its implications on domestic inflation.


The Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VEFX) exhibited
negative sentiments during the week under review. The value of transactions processed through
the National Payment System (NPS) was higher during the week under analysis, largely
reflecting increases in RTGS transactions.


The deposit rates for the domestic currency deposits remained unchanged, while the performance
of ZWL lending rates for loans to individuals and corporates was mixed during the week under
analysis. The volume and value of tobacco sales as at the end of the week under review were
higher compared to the corresponding period in 2022. Prices of the golden leaf were, however,
lower during the same period.


2.
INTEREST RATES

Local Currency (ZWL) Deposit Rates

Minimum and maximum ZWL deposit rates for savings deposits and deposits rates for 1-month,
6-month and 12-month tenor remained largely unchanged, during the week under review.
Minimum deposits rates for deposits of 3-month tenor were, however, marginally lower during
the same period. Commercial banks continued to offer high deposit rates for long-term deposits
as banks seek to encourage long-term deposits amid higher demand for local currency credit.


Table 1: Average Deposit Rates (per annum)
Date
Savings deposits (%)

1- Month deposit
rates (%)

3- Month deposit
rates (%)

6- Month deposit
rates (%)

12- Month deposit
rates (%)

Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
30-Jun-23

7-Jul-23


14-Jul-23

21-Jul-23


Source: Reserve Bank of Zimbabwe, 2023


Local Currency Lending Rates

The minimum ZWL lending rates for both corporate and individual clients increased during the
period of analysis. Maximum ZWL lending rates for both individual and corporate clients
registered a marginal decrease. The downward adjustments in maximum lending rates for
corporates are likely to continue, boosting borrowing by firms, amid prevailing tight liquidity
conditions in the market. The ZWL lending rates are shown in Table 2.


Table 2: Lending Rates (per annum)
Date
Minimum (%)
Maximum (%)
Minimum (%)
Maximum (%)

Individual Clients

Corporate Clients
23-Jun-23

30-Jun-23

7-July-23

14-July-23

21-Jul-23

Source: Reserve Bank of Zimbabwe, 2023

Foreign Currency (USD) Deposit Rates

The minimum and maximum savings and deposits rates on foreign currency deposits for all
tenors remained largely unchanged, during the week under review. The average foreign currency
deposits rates for all tenors are shown in Table 3.


Table 3: Average Foreign Currency Deposit Rates (per annum)

Date
Savings deposits (%)
1- Month deposit
rates (%)

3- Month deposit
rates (%)

6-Month deposit
rates (%)

12- Month deposit
rates (%)

Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
30-June-23

7-July-23

14-July-23

21-Jul-23

Source: Reserve Bank of Zimbabwe, 2023


Foreign Currency (USD) Lending Rates


Minimum and Maximum foreign currency (FCA) lending rates for both individual and corporate
clients declined marginally, during the week ending 21st July 2023. The reduction in FCA lending
rates for individual and corporate clients is a positive development for corporate and individual
clients as it encourages borrowing to boost production in the economy.

Table 4: Lending Rates (per annum)
Date
Minimum (%)
Maximum (%)
Minimum (%)
Maximum (%)

Individual Clients

Corporate Clients
16-Jun-23

23-Jun-23

30-Jun-23

7-July-23

14-July-23

21-Jul-23

Source: Reserve Bank of Zimbabwe, 2023
3.
CLEARING AND SETTLEMENT ACTIVITY

The value of transactions processed through the National Payment System (NPS) increased from
ZW$5.01 trillion in the previous week to ZW$5.64 trillion, during the week under analysis. The
Real Time Gross Settlement RTGS transaction values were 18% higher to close at ZW$5.14
trillion, during the week under analysis. The value of NPS transactions during the week were
distributed as shown in Figure 1.


Figure 1: Composition of NPS Transactions in Value Terms

Source: Reserve Bank of Zimbabwe, 2023


During the week under review, the volume of transactions processed through the NPS declined
by 16.19% to close at 8.52 million. This largely reflected increases in RTGS transaction volumes.
The NPS transaction volumes were distributed as follows: Mobile, 79.15%; POS, 17.87%;
RTGS, 2.01%; and ATM, 0.97%, shown in Figure 2.

Figure 2: Composition of NPS Transactions in Volume Terms

Source: Reserve Bank of Zimbabwe, 2023


RTGS
90,99%
POS
3,11%
ATM
1,87%
MOBILE
4,03%
RTGS
POS
ATM
MOBILE
RTGS; 2,01%
POS; 17,87%
ATM; 0,97%
MOBILE; 79,15%
RTGS
POS
ATM
MOBILE


Table 5: National Payment Systems Activity
PAYMENT
STREAM
WEEK ENDING
14 July 2023
WEEK ENDING

21 July 2023
% CHANGE FROM
LAST WEEK
PROPORTION
%

Values in ZW$ Millions


RTGS

POS

ATM

MOBILE

TOTAL

Volumes


RTGS

POS

ATM

MOBILE

TOTAL

Source: Reserve Bank of Zimbabwe, 2023

4.
TOBACCO SALES
As at the 21st of July 2023, or the 93rd day of the tobacco selling season, a cumulative total of
291.81 million kilograms of tobacco had been sold, compared to a cumulative total of 199.86
million kilograms sold during the same period in 2022. The turnover realized from the sales
amounted to US$884.42 million, a 44.9% increase, compared to US$610.50 million realized
during the same period in 2022.

Table 6: Weekly Cumulative Tobacco Sales: Day 93 (21st July 2023)

Variance (%)
Cumulative Quantity Sold (million
kgs)
199,863,657
291,809,894
46.00
Average Price (US$/kg)
3.05
3.03
-0.78
Cumulative value (US$ million)
610,497,401
884,424,807
44.87
Source: Tobacco Industry and Marketing Board (TIMB), 2023

The golden leaf was sold at a lower average price of US$3.03/kg, during the week under review,
down from US$3.05/kg realized during the same period in 2022.
5.
INTERNATIONAL COMMODITY PRICE DEVELOPMENTS

Average international prices for gold, platinum, palladium and crude oil rose, while copper and
nickel prices retreated, during the week under review. Table 7 shows developments in prices for
selected commodities, during the week under review.


Table 7: Metals and Crude Oil Prices: Week ending 21st July 2023

Gold
Platinum
Palladium
Copper
Nickel
Crude Oil

US$/ounce
US$/ounce
US$/ounce
US$/tonne
US$/tonne
US$/barrel
Weekly Average
(10- 14 July)

17-July

18-July

19-July

20-July

21-July

Weekly Average
(17- 21 July)

Weekly Change (%)

Source: BBC, KITCO and Bloomberg 2023

Gold

Gold prices continued on a positive momentum, rising by 1.25%, to US$1,967.71 per ounce
during the week ending 21st July 2023. The persistent uncertainty surrounding central bank
monetary policies and the persistent concern over inflation, contributed to a steady but cautious
investor sentiment, prompting some to turn to gold as a safe haven asset.

Platinum
Platinum prices surged by 3.27%, from a weekly average of US$944.20 per ounce in the prior
week to US$975.10 per ounce, during the reporting week. Prices increased in response to a
weaker U.S. dollar and expectations that the Federal Reserve would end its interest rate hiking
cycle.

Palladium
Palladium prices rose by 3.08%, from a weekly average of US$1,258.70 per ounce in the
previous week to US$1,297.50 per ounce, during the week under analysis. Prices were boosted
chiefly by a weaker U.S. dollar.

Copper
Copper prices eased by 0.75%, from an average of US$8,529.80 per tonne in the previous week
to US$8,465.90 per tonne, during the week ending 21st July 2023. The prices were weighed down
by the gradual slowing down in the pace of economic recovery in China, the top consumer of
metals.


Nickel
Nickel prices declined by 0.15%, from a weekly average of US$21,238.00 per tonne in the prior
week to US$21,207.00 per tonne, during the reporting week. Prices were pulled back by the
bearish overall macro sentiment in China, which limited support for industrial metals.

Brent Crude Oil
During the week ending 21st July 2023, average prices for crude oil increased by 0.13% to
US$79.80 per barrel, from US$79.69 per barrel recorded in the previous week. Prices continued
rising, buoyed by the growing evidence of supply shortages in the coming months and rising
tensions between Russia and Ukraine.


Exchange Rate Developments

Interbank Market
The Zimbabwe dollar (ZW$) appreciated by 6.8% on the interbank market, from an average of
ZW$5,111.28 per US$1 in the previous week to ZW$4,764.23 per US$1, during the week under
review. Table 8 shows selected foreign currency exchange rates.

Table 8: Selected Exchange Rates (ZW$ per unit of foreign currency)

USD
ZAR
GBP
BWP
EURO
Weekly Average (10- 14 July)

17-July

18-July

19-July

20-July

21-July

Weekly Average (17 -21 July)

Appr (-)/Depr (+) (%) of the ZWL

Source: Reserve Bank of Zimbabwe, 2023


6. EQUITY MARKETS


During the week ending 21st July 2023, both the Zimbabwe Stock Exchange (ZSE) and the
Victoria Stock Exchange (VFEX) traded in a negative trajectory. This was, in part, on account
of tight liquidity conditions in the market. As such, the ZSE and VFEX All Share indices lost
8.63% and 3.22% to close the week at 120 454.28 points and 71.05 points, respectively.


Zimbabwe Stock Exchange (ZSE) Developments

The Top 10, Top 15, Medium and Small Cap indices declined by 11.82%, 9.88%, 2.46% and
2.24% to 55 695.42 points, 77 666.80 points, 443 209.79 points and 2 111 765.23 points,
respectively. The resource index, however, gained 14.39% to close the week at 99 881.72 points,
compared to 87 315.32 points recorded in the previous week.

Figure 3 shows developments on the ZSE’s All Share, Top 10 and Mining indices from 22nd July
2022 to 21st July 2023.

Figure 3: ZSE All Share, Top 10 and Mining Indices
Source: Zimbabwe Stock Exchange, 2023

The decline in the mainstream index emanated from losses in share prices of OK Zimbabwe
Limited (22.02%), First Mutual Holdings Limited (20.00%), Zimre Holdings Limited (17.65%),
Ecocash Holdings Zimbabwe Limited (16.49%) and Delta Corporation Limited (16.38%).

Partially offsetting the abovementioned losses were share price increases for Rainbow Tourism
Group Limited (15.62%), First Mutual Properties Limited (13.07%), TSL Limited (12.96%),
Mashonaland Holdings Limited (9.52%) and Fidelity Life Assurance Limited (5.05%). The


22-Jul-22
05-Aug-22
19-Aug-22
02-Sep-22
16-Sep-22
30-Sep-22
14-Oct-22
28-Oct-22
11-Nov-22
25-Nov-22
09-Dec-22
23-Dec-22
06-Jan-23
20-Jan-23
03-Feb-23
17-Feb-23
03-Mar-23
17-Mar-23
31-Mar-23
14-Apr-23
28-Apr-23
12-May-23
26-May-23
09-Jun-23
23-Jun-23
07-Jul-23
21-Jul-23
Mining Index
All Share and Top 10 Indices
All Share Index (ZSE)
Top 10 Index
Mining Index

increase in the resource index emanated from a 14.39% gain in the RioZim Limited counter,
during the week under analysis.

Market Turnover
The cumulative value of shares traded on the ZSE increased by 34.64% to ZW$11 910.48
million, compared to ZW$8 846.24 billion recorded in the prior week. In the same vein,
cumulative volumes of shares traded amounted to 28.49 million shares, representing an increase
of 18.04% compared to 24.14 million shares recorded in the previous week.

Figure 4 shows the trend in daily market turnover for the period from 22nd July 2023 to 21st July
2023.
Figure 4: Market Turnover
Source: Zimbabwe Stock Exchange, 2023


Market Capitalisation
Reflecting the bearish sentiments on the ZSE during the week under review, the market lost
9.85%, or ZW$1 047.48 billion worth of capitalization to close at ZW$9 591.31 billion,
compared to ZW$10 638.80 billion registered in the previous week. Figure 5 shows the evolution
of market capitalization for the period from 22nd July 2022 to 21st July 2023.


22-Jul-22
05-Aug-22
19-Aug-22
02-Sep-22
16-Sep-22
30-Sep-22
14-Oct-22
28-Oct-22
11-Nov-22
25-Nov-22
09-Dec-22
23-Dec-22
06-Jan-23
20-Jan-23
03-Feb-23
17-Feb-23
03-Mar-23
17-Mar-23
31-Mar-23
14-Apr-23
28-Apr-23
12-May-23
26-May-23
09-Jun-23
23-Jun-23
07-Jul-23
21-Jul-23
ZW$ (Million)
Notable Trades: 31.45 million
Ariston Holdings Limited
shares and 4.26 million Delta
Holdings Limited shares
exchanged hands at
ZW$15.02/share and
ZW$4077/share, respectively.
Negotiated deal: 61.16 million
Lafarge Cement Zimbabwe
Limited shares exchanged
hands at ZW$312.65/share


Figure 5: Market Capitalization

Source: Zimbabwe Stock Exchange, 2023


Victoria Falls Stock Exchange (VFEX) Developments
The decline in the VFEX mainstream index was a result of share price declines for African Sun
Limited (13.55%), Simbisa Brands Limited (10.37%), Padenga Holdings Limited (6.24%),
Innscor African Limited (3.00%) and SeedCo International VX (1.70%). Partially offsetting the
abovementioned losses was an increase in the share price of Bindura Nickel Corporation (BNC)
(40.78%) and Axia Corporation Limited (1.39%) counters.

VFEX Market Turnover
The cumulative volume and value of shares traded on the VFEX declined by 70.61% and 64.96%
to 1.16 million shares and ZW$0.34 million, respectively

VFEX Market Capitalization
Reflecting the negative trading on the VFEX during the week under analysis, the market lost
1.97% worth of capitalization to close at US$1.21 billion, compared to US$1.24 billion
registered in the prior week.


22-Jul-22
05-Aug-22
19-Aug-22
02-Sep-22
16-Sep-22
30-Sep-22
14-Oct-22
28-Oct-22
11-Nov-22
25-Nov-22
09-Dec-22
23-Dec-22
06-Jan-23
20-Jan-23
03-Feb-23
17-Feb-23
03-Mar-23
17-Mar-23
31-Mar-23
14-Apr-23
28-Apr-23
12-May-23
26-May-23
09-Jun-23
23-Jun-23
07-Jul-23
21-Jul-23
$ Billions


Figure 6 shows the trend in the VFEX All Share Index for the period from 22nd July 2022 to
21st July 2023.
Figure 6: VFEX All Share Index

Source: Victoria Falls Stock Exchange (VFEX), 2023
7.
GREEDFLATION AND IMPLICATIONS ON DOMESTIC INFLATION
Zimbabwe witnessed increased inflationary pressures in May and June 2023 driven primarily by
behavioural factors as opposed to the common aggregate demand and supply side factors. Some
Firms took advantage of the transitory exchange rate volatility witnessed during the same period
to unjustifiably increase prices under the guise of cushioning themselves against potential
exchange losses. Of particular concern was the fact that the price adjustments were not in sync
with the observed degree of exchange rate depreciation on both the parallel and official markets
but the quest to maximize profits.

This phenomenon of increasing prices in pursuit of maximizing corporate profits has become a
recent concern in inflation dynamics in most economies and is termed greedflation. Precisely,
greedflation is a situation where the increase in inflation is driven by corporate greed. It is
characterised by a profit-price spiral where companies exploit inflation developments by
concomitantly raising prices to drive up their profit margins. This suggests that the rising costs
of goods and services observed in consumer prices are not only due to increases in the cost of

inputs such as labour and raw materials but are also explained in part by the pricing behaviour
of companies.

Greedflation is more common where companies enjoy near-monopoly power or dominant market
positions in their industries. These structures give companies considerable control over pricing
and consumers have little choice but to bear the higher costs of goods and services given the
limited availability of substitutes. This lack of competition can exacerbate inflationary pressures
caused by corporate greed, leading to even higher consumer prices where demand remains
elevated regardless of increases in prices. Aggregate demand has remained elevated in most
countries reflecting pent up demand from Covid-19 and this has allowed companies to sustain
higher profits.

Greedflation tendencies have been observed globally in recent times as Advanced economies
including the United States of America, the European bloc and the United Kingdom experienced
their highest levels of inflation since the 1980s. Recent developments on the inflation front in
both advanced and emerging market economies have shown that the rise in general prices was
more persistent than originally thought. One factor that could explain this, is the behaviour of
corporates. Particularly the market structures of their industries, resultant pricing behaviour and
pursuit of super-normal profits.

For example, the IMF highlighted that more than half of Europe’s inflation over the past two
years has been a result of companies profiteering. According to the IMF calculations corporate
profits accounted for 45% of price increases since the beginning of 2022. In addition, Cristine
Lagarde, the President of the European Central Bank (ECB), highlighted that ‘firms have been
able to increase their profit margins on the back of mismatches between supply and demand, and
the uncertainty created by high and volatile inflation’. ECB data has shown that inflation was
being driven by an increase in firm profits, indicating that the increase in energy costs from the
Russia-Ukraine conflict could have provided cover to prop up profit margins.


Zimbabwe may be experiencing a similar trend as advanced economies albeit in different
economic circumstances. Average profit margins for the select companies in the retail,
beverages and manufacturing sector in the country were stable below 30% from 2011 to
2016. However, average profit margins rose above 30% in 2018 and reached 57% by 2022
for some companies, a period where inflation reached its highest levels in a decade and
currency reforms drove volatility in the exchange rate.

Consistent with the characteristics of greedflation these dynamics reflect the tendency to
engage in forward pricing as companies in Zimbabwe are raising prices higher than the
underlying costs they are facing, particularly during periods of increased exchange rate
volatility. This profit-price spiral has an overall negative impact on the general price level in
the economy, and points to the role of corporate greed in stoking inflationary pressures in the
domestic economy.

The bold policy measures announced by the Bank and Government for tackling the transitory
price and exchange rate volatility in May and June 2023 have gone a long way in fostering
exchange rate stability in the economy. This has brought normalcy in the price and exchange
rate dynamics in the economy. Precisely, the wholesale auction system is exerting a dual
effect of mopping up excess liquidity and re-establishing the optimal mix of the dual
currencies, thus sustaining the current exchange rate and price stability.

These measures have seen substantial correction in the exchange rate which had overshot its
equilibrium, and a concomitant decline in local currency prices. Positively, the month-onmonth inflation which stood at 74.5% in June 2023, significantly reversed in July 2023 to
minus 15.3%. Similarly, the annual inflation which had risen from 86.5% in May 2023, to
175.8% in June 2023, fell significantly to 101.3% in July 2023. The exchange rate is expected
to continue to stabilise in the short to medium and result in inflation reverting to its pre-May
2023 monthly trajectory.


While controlling inflation is purely the mandate of the Bank, greedflation raises questions
regarding ethical business practices and unfair competition which may require intervention
and consumer safety nets, provided by statutory bodies such as Competition and Tariff
Commission and the Financial Intelligence Unit (FIU). As such, in addition to the bold
monetary policy measures by the Bank, the current strong and effective monitoring and
surveillance by the FIU is critical in eliminating incidences of greedflation through exchange
rate manipulation and abnormal pricing and profiteering practices.


RESERVE BANK OF ZIMBABWE

APPENDIX 1: FOREIGN EXCHANGE AUCTION RESULTS FOR MAINFX1 AND WHOLESALEFX 2
Source: Reserve Bank of Zimbabwe, 2023

1 Main Foreign Currency Auction. The Auction is normally conducted every Tuesday every week.
2 Wholesale Foreign Currency Auction (Wholesale FX). The RBZ MPC resolutions dated 6 June 2023 resolved that with effect from 7 June 2023, the Bank shall sell foreign currency at the market-determined exchange
rate through banks to support and strengthen the foreign exchange interbank market, and banks shall in turn sell the foreign currency to their customers.


WHOLESALEFX
11-July-23 14-July-23 18-July-23 20-July-23
Total
Bids (US$ dollars)


Amount Allotted (US$ dollars)

Highest Rate

Lowest Bid
Rate

Lowest Bid Rate Allotted

Weighted Average Rate

Number of Bids Received

Number of Bids Rejected

APPENDIX 2: SUMMARY OF FOREIGN CURRENCY AUCTION ALLOTMENTS BY PURPOSE
Source: Reserve Bank of Zimbabwe, 2023

Purpose
MAINFX
27-June-23 04-July-23 11-July-23 18-July-23
Raw Materials

Machinery and Equipment

Consumables
(Incl. Spares, Tyres,
Packaging)

Pharmaceuticals and
Chemicals

Services (Loans, Dividends
and Disinvestments)

Retail and Distribution

Fuel, Electricity and Gas

Paper and Packaging

TOTAL
797,323.53
580,921.57
460,130.60
542,480.15