A digital copy of the Business News 24 (20 June edition). Zimbabwe's premier business news free sheet published by the Zimpapers Newspapers Group (1980) Limited and available every week day from 1530hrs to give a summary of the day's business news.

1. News Update as @ 1530 hours, Friday 20 June 2014
Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw
By Tawanda Musarurwa
Observers say the current banking cri-
sis necessitates high capital levels and
stronger regulation to protect deposi-
tors.
An analysis of banks' results for 2013
shows reduced profitability, indicating
a weakening sector. The analysts con-
tend that because the sector is per-
forming so poorly, the Reserve Bank of
Zimbabwe should maintain high capital
thresholds and strengthen regulation
to protect depositors.
Commercial banks are supposed to
meet the set $100 million capital
threshold by 2020 and are expected
to have submitted their comprehensive
re-capitalisation plans to the central
bank by month-end.
Local economist and head of Econom-
eter Global Capital Takunda Mugaga
said although most commercial banks
operating in the country will struggle to
meet the $100 million capital thresh-
old, the standard should be maintained
as risk was "nearing peak". "Actu-
ally capital requirements cannot be
reviewed downwards when both liquid-
ity and credit risks are nearing peak. "It
is equally noteworthy that banks will
not perform miraculously better even
assuming capital requirements were
to be scrapped. What Basel calls for is
to have capital levels commensurate
with risks being carried, which we call
Capital Adequacy," he said. "As a mat-
ter of fact, this is the best moment to
cushion depositors and this can only
be achieved through maintaining high
capital levels."
Last year, the banking sector industry
average after tax profits declined to
$4,5 million from $8,4 million in 2012.
In percentage terms, that was a 46
percent decline in profitability during
the period. And the situation in the
sector is expected to worsen this year
as liquidity challenges and the short-
term nature of deposits continue to
constrain local banking operations.
Economic analyst Ronald Chizenga
however believes that the RBZ should
do more in ensuring that banks comply
with the maximum fixed asset ratio of
25 percent.
"Although capital adequacy is an
important regulatory instrument to
ensure solvency in the financial sys-
tem, it is also critical that the central
bank closely monitors the liquidity
of banks. Because a bank can have
sound capital adequacy ratios and yet
be bogged down by being in an illiquid
position," he said.
However, there are concerns in some
quarters that the effect of exces-
sive regulation will be to regulate the
amount of lending that local banks will
do, which in turn will affect money sup-
ply growth in the economy. Being in a
deflationary state, Zimbabwe requires
a serious injection of capital. •
'Weakening banks performance necessitates high capital adequacy'

2. By Rumbidzayi Zinyuke
Zimbabwe’s raw milk production
increased by a marginal 0,5 percent in
thefivemonthstoMay2014compared
tothesameperiodlastyearmainlydue
to an increased herd and an availability
of stock feed for dairy cows.
Statistics from the Dairy Services Unit
in the Ministry of Agriculture, Mecha-
nisation and Irrigation Development
show that milk production for the
period stood at 22 245 942 litres, up
from 22 128 847 liters in 2013.
Regional dairy officer, Addmore Wan-
iwa said the depressed volumes expe-
rienced in the first quarter could be
attributed to the liquidity crunch which
is affecting feed procurement by farm-
ers.Hesaidtheavailabilityofharvested
crop had also positively impacted on
affordability of stock feed.
“Liquidity challenges tend to have a
negative impact on output in dairy
production as the industry is capital
intensive. However volumes are on a
gradual increase due to availability of
crops which farmers are using in mak-
ing their own feed rations with bought
in feed, supplementing their require-
ments,” he said.
During the period under review, the
intake of raw milk for processing was
down 0,3 percent from 19 960 488
litres in 2013 to 19 905 399 litres.
However, producers retailed 7,9 per-
cent more milk in the five months to
May than the comparable period. In
2013, 2 168 359 litres were retailed by
producers and the number went up to
2 340 543 litres this year.
On a month-on-month basis, produc-
tion for May went up 3,7 percent to 4
604 768 litres from 4 441 293 litres in
May 2013.
Zimbabwehasbeenfailingtomeettar-
gets for milk production since its drastic
drop to 12 million litres in 2009. Last
year production stood at 54,6 million
litres, a figure far less than the targeted
70 million litres which still falls short
of the national demand of 120 million
litres per annum.
The low supply of raw milk is contribut-
ing to the high import bill as dairy com-
panies import whole powdered milk to
supplement.
The move to increase the national herd
by importing heifers has however con-
tributed to the increased the number
of milking cows and subsequently the
increase in milk production.
The heifer importation scheme is
expected to provide an additional four
percent of raw milk per month. •
2 NEWS
Zimbabwe raw milk production marginally up

3. BH24

4. 4 NEWS
By Isdore Guvamombe
Finally, Zimbabwe and Zambia have
agreed to implement a uni-visa regime
starting this month to boost tourist
arrivals between the two countries
after years of working on it.
The implementation matrix which
had been stalled for many years, was
tested during the United Nations World
Tourism Organisation general assem-
bly, held in Victoria Falls in August
last year and is ready as a major step
towards a single visa regime for Africa.
Zimbabwe’s Tourism and Hospital-
ity Industry Minister, Engineer Walter
Mzembi said the neighbouring coun-
tries now expect to proceed to a com-
mon visa for Southern Africa
Zimbabwe and Zambia share the world
famous premier tourist resort, the Vic-
toria Falls, one of the natural wonders
of the world. Minister Mzembi said the
concept has been approved by both
governments after the two countries
ran a pilot project when they co-hosted
UNWTO.
“At policy level we are done. We are
just working on a few areas to ensure
the process is smooth.
“As I speak we are talking to the World
Bank and one of the issues is about
funding the project,” Minister Mzembi
said.
The agreement will also give the SADC,
through the Regional Tourism Organ-
isation of Southern Africa, Retosa, an
opportunitytoevaluatethefeasibilityof
a common visa before the SADC Heads
of States and Governments meet in
Victoria Falls in August to deliberate on
the issue. •
Uni-Visa for Zimbabwe and Zambia
Minister Mzembi

5. AdM-DI156506-
BH24

6. 6 NEWS
Ashraf Elguindy, Telecel Zimbabwe Chief Commercial Officer, resigns
Telecel Zimbabwe’s Chief Commercial
Officer, has resigned. Suddenly.
A number of trusted sources inside the
company told us and confirmed that an
email to staff was sent out yesterday
evening by the Telecel Zimbabwe Gen-
eral Manager, Angeline Vere, advising
everyone Elguindy had exited with
immediate effect. The reason, appar-
ently, is that he had chosen to pursue
new opportunity elsewhere.
Normally, this wouldn’t be news. But
when people make an effort to reach
out to us with such stuff we know bet-
ter than not to assume something big
is going on somewhere.
Unfortunately no one, including official
sources, will say why the sudden exit.
The curious thing is this is the kind of
sudden exit that characterised that of
the former CEO Francis Mawindi. He
too left in a huff to pursue other oppor-
tunities. Only to turn out he had been
fired, and that he was bitter enough
about it to sue.
We have no idea if Elguindy was actu-
ally fired, but it certainly can’t be ruled
out. It’d also be interesting to know
which shareholders fired him; is it
the Egyptians, or is it the local share-
holders. Or is it he wasn’t fired but
did indeed decide to leave. But who
chooses to leave with immediate effect
in the middle of the month?
Another reason could be that his work
permit didn’t get renewed, but then
again, who says someone has to be in
Zimbabwe to be the CCO. John Swaim
is MD, and he’s certainly not here.
Whatever the reason, life has to go on
at Telecel and we’re told Nkosinathi
Ncube (the executive leading the Tel-
ecash project) will take over as acting
CCO. ― TechZim •
Former Telecel Zimbabwe, CCO, Ashraf Elguindy

7. By Lynn Murahwa
The Infrastructure Development Bank
of Zimbabwe (IDBZ) has said the
non-repayment of monies disbursed
under the Youth Fund hurts the finan-
cial institutions since it is their money
andpartofrevolvingfundsforprojects.
IDBZ senior loans officer Tichaona
Kaseke told youths at a Youth Business
Consultative Forum this afternoon that
it is critical that loans be paid as they
belong to the investment schemes.
“We want the youth to know that if
they get money from IDBZ they should
pay back the loans because it does not
belong to the Government but to the
project schemes. We use the Ministry
of Youth structures in wards, districts
and provinces, so they monitor the
projects on our behalf to make sure the
loaninterestratesarelow.Wecutcosts
because the ministry monitors projects
on our behalf” he said.
He said the money given to youths for
projects is a revolving fund and as such
the projects cannot continue until it has
been paid back for the next individual
to be aided. “The money we have is
a revolving fund so when we loan the
money we expect it to be paid back
so that we can give other people who
need that money” he said.
He added that the problem that most
banks are facing with youth loans is
that the receivers of the loans use cap-
ital instead of profit to improve their
lifestyle.
“When we give them money they plant
crops and use the proceeds to buy
things like cars instead of re-investing
the money into their projects resulting
in the money disappearing. Kaseke
saidtheIDBZhasadutytodevelopthe
right kind of attitudes in youths adding
that debts are not paid because the
loans are not being paid back.
“We are a developing bank and we are
supposed to develop the correct busi-
ness attitudes in youth. The debts not
being paid are not a reflection of peo-
ple not doing their job but it is because
loans are not being paid back and the
money is being used outside its stipu-
lated mandate” said Kaseke.
Deputy Minister of Youth, Indigenisa-
tion and Empowerment Mathias Ton-
gofa said the Ministry may not have
the required resources but they are
committed to developing skills among
the youth.
“We do not have resources but we
are committed that vocational training
centers improve, increase enrollments
and we are committed to skills devel-
opment” he said. He added that the
Ministry is there to provide opportuni-
ties for youth and not just resources
alone. “The Ministry is there to provide
opportunities and not merely resources
so we urge the youth to pay back the
loans assigned to them” he said. •
NEWS7
Youth loans non-repayment hurts banks, projects funding says IDBZ

8. The equities market maintained a bull-
ish trend with the industrial index rising
2,54pointstoclosetheweekat187.40
points.
Tobacco processor BAT added 10 cents
to trade at 1235 cents while PPC went
up 5 cents to close at 230 cents. bev-
erages manufacturer, Delta increased
by 3.01 cents to trade at 124.01 cents.
Innscor was 2.01 cents solid at 80.01
cents and TSL was up 2 cents at 30
cents.
Thegainswerepartiallyoffsetbylosses
in Mashonaland Holdings which shed
0.10 cents to close at 2.3 cents with
Ariston easing 0.05 cents to close at
0.80 cents.
Dawn went down 0.01 cents to close
at 0.95 cents. Volumes on the local
bourse however remain lethargic and
the value of trades was at $1.208 mil-
lion, mainly driven by trades in TSL,
Econet and Delta.
Week on week the industrial index rose
6.66 points.
The mining index was up 1.22 points
to close the week at 59.00 points after
Hwange was bid higher at 7 cents.
Bindura, Falgold and Riozim main-
tained previous trading levels.
— BH24 Reporter •
8 ZSE REVIEW
Equities close week on high

9. Zimbabwe is targeting restoration to
the London Bullion Market Association
(LBMA) with increased gold production
this year.
Buttoensurethatthecountryremains
a member there is need for the coun-
try's gold producers to be sustainable.
And that requires efficiencies. How-
ever the current gold production
micro-environment and the mac-
ro-environment are not conducive for
sustained efficiencies.
To be clear, local gold producers are
likely to experience reduced or no
profits if weak gold prices continue to
prevail on the global market. This is
attributable to the additional effects of
high gold royalties, energy costs and
inflexible labour laws.
Falgold chairperson Ian Saunders
recently forebode a bleak outlook
on the basis of the constrained per-
formance of the precious mineral on
international markets. "Of particular
note is the continued weak world price
of gold. The gold price has fallen from
a range of approximately $1 600 -
$1 650 per ounce through 31 March
2013, to a current range of approxi-
mately $1 250 - $1 300 per ounce,"
he said in a statement accompanying
the firm's half-year interims.
Subdued trading on gold futures mar-
kets since the beginning of the year
has negatively affected gold producer
across the world, but more-so for Zim-
babwe as it is a high-cost producer.
Saunders said the combined effect of
the low gold prices and various high
rates and taxes is added pressure on
local gold production in the outlook.
"At these levels, with the current tax
regime, rigid labour laws and the high
power costs, operating profitability is
non-existent. The Chamber of Mines
of Zimbabwe had, in late 2013 and
into early 2014 requested that the
Government review the high direct
and indirect taxes and other charges,
together with the high power charges
imposed on gold mining companies.
"These high taxes and charges were
sustainable in the elevated gold price
regime of 2012 and early 2013, but
not at the current gold price levels. As
a result, production at the larger gold
mines has been falling. Unfortunately,
to date, the Government has not
seen fit to reduce the levels of taxes,
charges and power rates, likely due to
current domestic liquidity constraints."
Yesterday, the international gold price
scaled $1 300 an ounce for the first
time in more than a month. According
to mining.com, on the Comex division
of the New York Mercantile Exchange,
gold futures for August delivery –
the most active contract – jumped
to a day high of $1 322 an ounce,
up $49,30 or nearly 4 percent from
Wednesday's close.
This was after comments by US Fed-
eral Reserve chair Janet Yellen yester-
day and a huge buyer lit a fire under
traders. But the current gold price is
still significantly lower than the highs
of $1 600 an ounce achieved in 2012
when some of the current local rates
and taxes were put in place.
Given trends since the beginning of
the year, this latest price bump is reac-
tive and therefore expected only to be
temporary.
Although it would be difficult, nay
impossible, for Government to adjust
royalty or other policy in reaction to
commodity price trends, there is need
to make the sector a low cost producer
for competitiveness' sake. •
9 BH24 COMMENT
Production inefficiencies worsening effects of low gold prices

10. BH24

11. South Africa's rand was still on a firm
footing against the dollar on Friday
after touching 10-day highs the pre-
vious session, with investors favour-
ing high-yielding emerging markets
after the Federal Reserve signalled
U.S. rates would stay low for a while.
The local unit traded at 10.7095
against the dollar by 0703 GMT, up
0.4 percent from Thursday's close.
Government bonds were largely sta-
ble, with the yield for the 2026 paper
edging up 1 basis point to 8.325 per-
cent and that for the bond due next
year adding half a basis point to 6.65
percent.
Local assets took their cue from
bullish global markets as investors
bet that monetary policy would stay
loose in the United States, Europe
and Japan for a long time to come.
"South African assets still offer some
great emerging market value and
we expect real money flows to con-
tinue," Standard Bank trader Maemo
Rametse said in a morning note. "No
major data out today so technicals
and flow should determine the tra-
jectory."
However, investors are still worried
that a resolution remains elusive to
end a crippling domestic platinum
strike which pushed the economy into
contraction in the first quarter of the
year. ― Reuters •
11 REGIONAL News
South Africa's rand firmer as global risk appetite rises
enjoy the CAIO ride!

12. BH24

13. 13 DIARY OF EVENTS
The black arrow indicate level of load shedding across the country.
POWER GENERATION STATS
Gen Station
20 June 2014
Energy
(Megawatts)
Hwange 578 MW
Kariba 750 MW
Harare 45 MW
Munyati 28 MW
Bulawayo -- MW
Imports 155 MW
Total 1556 MW
26 June - Pioneer 44th Annual
General Meeting of Sharehold-
ers, Venue: Pioneer Corporation
Africa Limited Boardroom, Corner
Hood/Hermes Roads, Southerton,
Harare, Time: 10:00 hrs
26 June - Masimba Holdings
Limited Thirty-Ninth Annual
General Meeting of Mem-
bers for the period ended 31
December 2013, Place: 44 Til-
bury Road, Willowvale, Harare,
Zimbabwe, Time: 12:00
30 June - TA Holdings 79th
Annual General Meeting of the
ordinary members Venue: Miti
Room, Sango Conference Centre,
Cresta Lodge, Harare, Time: 1400
hours
30 June - ZIMRE 16th Annual
General Meeting of members,
Venue: NICOZDIAMOND Audito-
rium, 7th Floor Insurance Centre,
30 Samora Machel Avenue, Time:
1230 hours
THE BH24 DIARY

14. 14 zse
ZSE
Movers CHANGE Today Price USc SHAKERS Change TODAY Price USc
TSL 11.11% 1.00 Ariston -50.00% 3.00
Dairibord 30.00 4.21 Mashonaland Hold-
ings
0.80 0.04
Zimre Property Invest-
ments
9.20 21.00 Dawn Properties 2.30 0.05
Innscor 0.90 225.00
Delta 80.01 1.30
PPC 124.01 70.01
FBC 230.00 73.50
Indices
Index Previous Today Move Change
Industrial 181.03 182.50 +1.47 points +0.81%
Mining 52.08 54.58 +2.50 points +4.80%
Stocks Exchange

15. 15 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 2,354.16 -7.26 -0.31% 18June
Kenya 4,790.38 +26.27 +0.55% 18June
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 41,171.16 +35.46 +0.09% 18June
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 182.50 +1.47 +0.81% 18June
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 secret
of success is consistency
of purpose." - Benjamin Dis-
raeliGlobalshareholder.com

16. BH24

17. The European Central Bank would
need to move to full-scale quantita-
tive easing if inflation in the euro zone
remains in the doldrums, the Interna-
tional Monetary Fund said.
“If inflation remains stubbornly low,
the ECB should consider a large-scale
asset purchase program,” the Wash-
ington-based IMF said in an assess-
ment of the euro-area economy. “This
would boost confidence, improve cor-
porate and household balance sheets
and stimulate bank lending.”
Speaking to reporters in Luxembourg
late yesterday after making the rec-
ommendations to euro finance minis-
ters, IMF Managing Director Christine
Lagarde said inflation’s resistance to
the ECB’s latest measures would rep-
resent the “stubbornness” that triggers
quantitative easing.
The central bank stopped short of
quantitative easing when it announced
unprecedented stimulus measures on
June 5, cutting interest rates to all-time
lows and prodding commercial banks
to increase lending. It became the first
major central bank to experiment with
negative rates, putting the deposit rate
at minus 0.10 percent.
“I think there is no disagreement with
the IMF. We’ve been clear that in case
inflation would be too low for too long,
we can use additional instruments,
including additional non-conventional
measures,” ECB Executive Board
member Benoit Coeure told reporters
in Luxembourg today. “But we are not
in that situation today.”
‘In the Toolbox’
An asset-purchase program “is pos-
sible, it is in the toolbox, but it is not
needed today,” Coeure said. “I don’t
thinktheIMFwoulddisagreewiththat.”
The IMF gave a bleak assessment of
an 18-nation economy still shaking off
the debt crisis, noting that output is still
below pre-crisis levels, inflation at 0.5
percent in May “worryingly low” and
unemployment at 11.7 percent in April
“unacceptably high.”
“The recovery is neither robust nor suf-
ficiently strong,” the IMF said.
Progress toward a euro banking union
gotmixedreviews.Whilebanksupervi-
sion will be anchored with the ECB and
a system for resolving failing banks has
been streamlined, “the current planned
backstop may prove insufficient to
break decisively bank-sovereign links,”
the IMF said.
New rules on deficits, debt and eco-
nomic imbalances include many “pos-
itive elements,” the IMF said, while
criticizing them as “excessively com-
plicated with multiple objectives and
targets.” ―Bloomberg •
17 INTERNATIONAL NEWS
IMF urges ECB to fight low inflation with asset purchases

18. By Perry Munzwembiri
When Ghana revised its Gross Domes-
tic Product (GDP) figures in 2010, the
resultant 60 per cent jump in its GDP
estimates saw it being upgraded from
low-income country to a lower-middle
income country.
Similarly, Guinea Bissau and The Gam-
bia also discovered that their econo-
mies were more than double the size
of what had previously been reported
after embarking on exercises to recal-
culate their GDP statistics.
Perhaps more pronounced was the
giant 89 per cent leap by Nigeria to
the title of Africa`s biggest economy
(with a GDP of around $510 billion)
after rebasing its GDP figures in April
of this year.
While the ordinary person walking the
streets of Accra, Lagos and Abuja did
not immediately have more money
in their pockets after their respective
rebasing exercises, there are benefits
to updating national income statis-
tics. Kudakwashe Kadungure,Senior
sub-Saharan Africa Equities Analyst at
Imara Africa Securities, a division of
Imara SP Reid said:“I think it is gener-
ally a positive thing to work with num-
bers that better reflect the true state
of affairs,” in an emailed response to
questions on the benefits of revising
National Income statistics.
“With regards to fiscal planning, espe-
cially where taxes are concerned, I
think it is definitely in everyone`s
interest that governments implement
tax policies that are as efficient as
possible,” Kudakwashe further added,
underlining the importance of govern-
ments using tools that are accurate in
determining their policies.
In explaining how the updating of
national income statistics could poten-
tially lure investors and boost private
sector activity, Kudakwashe said, “For
an investor interested in a recently
rebased economy, one can already see
how an understatement in metrics that
compares that particular market to a
global or regional benchmark (such as
consumption per capita vs. GDP per
capita) can suggest greater growth
prospects than previously thought. The
net effect becomes that overall, posi-
tive perceptions of the local economy
ensue and investors are attracted to
such countries after the revision of GDP
figures.
“With the Nigerian example, we find
that some Africa facingemerging mar-
ket funds immediately increased their
holdings in Nigeria since their asset
allocation was also dependent on GDP
weighting,” Kudakwashe added. It
would appear then, that the case for
moreAfricaneconomiestoupdatetheir
national income statistics has merit.
Especially when one considers the
exclusion of key sectors that have
become more dominant now than in
the past like Entertainment, Informa-
tion and Communication Technologies
(ICTs), Banking, and the informal sec-
tor, it would be in the best interests of
African countries to revise their GDP
statistics to better reflect economic
activity.
Yet at the recently concluded African
Development Bank (AfDB) Annual
Meetings in Kigali, Rwanda, AfDB
Vice-President and Chief Economist,
18 Analysis
African Countries Must Re-benchmark their GDP statistics

19. 19 Analysis
Professor Mthuli Ncube indicated that
Africa`s GDP could be underestimated
by as much as 30 per cent due to out
of date GDP bases and informal sec-
tor activity that is unaccounted for. At
present Africa`s GDP stands at around
$1,5 trillion, but Professor Ncube reck-
ons this figure could be somewhere
north of $2 trillion, if national income
statistics of all African countries were
up to date.
Data shows that after a rebasing exer-
cise, on average, GDP figures of African
countries increased by nearly 30 per
cent. However, a major cause for con-
cern is the fact that only 10 out of 54
African countries comply with the inter-
nationally accepted standards of using
a base year for their GDP calculations
which is 5 years of fewer old.Currently,
19 countries use a base year that is at
least a decade old, with 7 using base
years that are 20 years old and the
Democratic Republic of Congo (DRC)
being the extreme case using a base
year from the 1980s.
Given the potential benefits of using
currentGDPstatistics,Africancountries
have displayed a reluctance to revise
their national income figures. Granted,
re-benchmarking GDP figures does not
always imply an increase in GDP. For
instance, when Botswana rebased its
GDP statistics, adopting 2006 as the
new base year whilst abandoning the
old base year of 1993, it witnessed a
10 per cent decline in its GDP statistics.
Such was the case with Ethiopia and
Lesotho which both recorded marginal
declines of 1 per cent and 4.4 per cent
respectively, after their GDP rebasing.
The importance however, of using cur-
rent data which better portrays the
state of economic activities is essential.
For countries like Zimbabwe which are
trying to attract Foreign Direct Invest-
ment (FDI) inflows, rebasing should be
prioritised.
Obviously, a GDP rebasing exercise
requires a tour de force to implement.
Looking at Nigeria, preparatory work
for its rebasing exercise started in the
last quarter of 2011 according to the
country`sNationalBureauofStatistics.
The process would involve surveys of
economic activities that were not previ-
ously captured, validation of data with
sector experts and assistance from
international development partners.
For most African countries, the finan-
cial and technical capacity to conduct
such an exercise of enormous propor-
tions could be a hindrance. This could
in part explain why there has been a
rather slow uptake of GDP rebasing,
with some continental heavyweights
like Kenya still to rebase.
However, some feel that African gov-
ernments deliberately ignore rebasing
exercises, as doing so would reveal
flaws in economies such as growing
income inequalities, lower spending on
key areas like education and health as
well high incidences of institutionalised
corruption and leakages.
Some analysts have even gone to the
extent of suggesting that countries
deliberately understate their GDP fig-
ures so they can be eligible for debt
relief from international finance institu-
tions under the Heavily Indebted Poor
Countries (HIPC) initiative.
If the continent is to remain in its
growth trajectory, it is critical that
African economies update their GDP
figures to show a truer reflection of
economic activities, such that policy
makers make evidence based deci-
sions.
Furthermore, as the informal sector
on the continent has rapidly grown
over the years, it is necessary that this
sector is formalised and included in the
national income statistics.
ChangesinweightingsusedinGDPcal-
culation could also increase the diver-
sity of the economies, especially when
sectors higher up the value chain such
asmanufacturingandservicesarecon-
sidered.
Going forward, it is important for
African economies, especially those
in need of significant FDI flows to
re-benchmark their GDP. This could
likely improve investor sentiment and
lure potential investors.
For Africa, higher GDP figures may
enhance the continent`s role in the
global economy, and see it become a
more dominant force.
A mere GDP rebasing without compli-
mentary policy and regulatory reforms
however, would come out to nought as
investors would shun countries without
favourable policies. On the whole, it is
in the continent`s best interests to use
up to date statistics, and policy makers
should seriously consider rebasing in
their individual countries. •