By <a href="https://www.cnbc.com/ryan-browne/">Ryan Browne</a> 



<a href="https://www.cnbc.com/quotes/?symbol=FB" class="">Facebook</a>&nbsp;has made headlines of late with its plans to create a cryptocurrency.



The social media company has been&nbsp;<a href="https://www.cnbc.com/2019/07/17/facebook-currency-chief-questioned-at-house-financial-services-hearing.html" class="">forced to defend the project</a>&nbsp;on Capitol Hill, amid regulatory concerns around data privacy and potential illegal usage, while the G-7 has warned it poses “serious” legal risks.



It’s an experiment in monetary systems for the digital age, and has inevitably been compared to popular cryptocurrencies like&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=BTC=" class="">bitcoin</a>. However, many experts question whether Libra can even be called a cryptocurrency.



Other than the fact that they both come with a white paper and are referred to as cryptocurrencies, Libra and bitcoin are actually very different. Here’s a rundown of the key differences between the two.



<h2 class="wp-block-heading">Different technology</h2>



One of the biggest differences lies in the underlying technology behind both currencies.



With bitcoin, transactions are recorded anonymously on a public ledger known as&nbsp;<a href="https://www.cnbc.com/2018/06/18/blockchain-what-is-it-and-how-does-it-work.html" class="">the blockchain</a>. It’s essentially a database maintained by a network of computers, on which transactions are secured in such a way that makes it virtually impossible to tamper with.



Libra also uses a form of blockchain, or distributed ledger technology. But unlike bitcoin, Libra’s blockchain is permissioned —&nbsp;<a href="https://libra.org/en-US/permissionless-blockchain/#overview" class="">at least for now</a>&nbsp;— meaning that transactions can only be added to it by a group of trusted parties.



That’s where the Libra Association, a Switzerland-based consortium of companies including&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=V" class="">Visa</a>&nbsp;and&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=UBER" class="">Uber</a>, comes in. Each of the nonprofit organization’s members have invested a minimum of $10 million into the project.



“Libra will create a centralized structure governed by an unelected ‘association’ composed exclusively of large institutions who have purchased their voting rights,” said Ido Sadeh Man, founder and president of the Saga Foundation, a cryptocurrency firm that counts&nbsp;<a class="" href="https://www.cnbc.com/quotes/?symbol=JPM">J.P. Morgan</a>&nbsp;Chairman Jacob Frenkel as an advisor.



It’s different to bitcoin’s network, which can be accessed and maintained by anyone with decent enough hardware and access to the internet.



“Cryptocurrencies are defined by their lack of reliance on trusted intermediaries,” Peter Van Valkenburgh, director of research at the cryptocurrency policy think-tank Coin Center, said in a&nbsp;<a href="https://coincenter.org/entry/the-differences-between-bitcoin-and-libra-should-matter-to-policymakers" class="">recent blog post</a>.



“We believe that Libra is not a cryptocurrency because of its use of a permissioned ledger and its reliance on a trusted issuer to hold and manage a fund of assets that back the currency.”



<h2 class="wp-block-heading">Different use cases</h2>



Bitcoin’s white paper describes the virtual currency as a peer-to-peer payment system, allowing people to exchange money without going through a bank.



It’s commonly used today as a form of investment, with the term “HODL” being a common slang phrase in the industry to describe buying and staying invested in the cryptocurrency for the long term. It’s frequently been referred to as “<a href="https://www.cnbc.com/2019/06/19/bitcoins-digital-gold-but-facebooks-libra-is-the-digital-dollar.html" class="">digital gold</a>. ”



Libra’s primary purpose is to be used in cross-border payments and money transfers. The currency is tied to a basket of government-backed currencies and other assets, to avoid the volatile swings often seen in cryptocurrencies like bitcoin and&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=ETH=" class="">ether</a>.



Referred to by many in the industry as a “stablecoin,” Libra is aimed at maintaining a stable value. David Marcus, the Facebook executive leading the blockchain initiative, has previously said it will work “more like a traditional currency” than a cryptocurrency.



“Bitcoin and Facebook’s Libra both represent stages in the evolution of currency but in starkly different ways,” Charles Hayter, co-founder and CEO of digital currency comparison platform CryptoCompare, told CNBC.



“Bitcoin is permissionless, fully decentralized, deflationary and volatile. Libra is permissioned, more centralized, governed by supply and demand and pegged to fiat currencies.”



What Hayter means by “governed by supply and demand” is that Facebook and its partner companies can adjust the supply to match a quantity of other assets held in reserve, effectively maintaining a stable price even when demand changes.



Bitcoin on the other hand has a fixed supply. The total number of bitcoins that will ever be minted is “hard-capped” at 21 million.



“Bitcoin supply is fixed and cannot react to the market’s demand,” the Saga Foundation’s Sadeh Man said. “Libras are created or burned when one of Libra’s authorized resellers deposit or withdraw money from its reserve.”



<h2 class="wp-block-heading">Different regulatory questions</h2>



Facebook’s currency has taken the spotlight when it comes to talk of regulating cryptocurrencies. But some worry the company’s blockchain project could be lumped in with other digital assets by regulators.



That would be problematic given the difference between Libra and a digital currency like bitcoin. Whereas bitcoin rules out the need for financial intermediaries, Libra’s model is reliant on the entities which form the Libra Association, Coin Center’s Van Valkenburgh said.



“A system without intermediaries is a system without intermediary risk, and thus no need for regulation aimed at safeguarding against the types of risk presented by intermediaries,” he said.



The Libra Association currently consists of 28 founding members, according to the Libra white paper, and is hoping to reach 100 members by the time the currency launches. The token is slated for launch in the first half of 2020.



Though bitcoin’s network involves so-called “miners” who record transactions, it wouldn’t make sense to regulated them as they aren’t trusted custodians of user funds, Van Valkenburgh said. Cryptocurrency exchanges and wallets on the other hand do require regulatory oversight, he added.



Questions around how Libra would fit into existing financial regulations were raised at Wednesday’s hearing. Facebook’s Marcus was grilled on whether Libra could be considered a financial security, which he said could not be the case. But Marcus said it could possibly be considered a commodity.



Securities and Exchange Commission Chairman Jay Clayton&nbsp;<a href="https://www.cnbc.com/2018/06/06/sec-chairman-clayton-says-agency-wont-change-definition-of-a-security.html" class="">last year told CNBC</a>&nbsp;that cryptocurrencies like bitcoin could not be viewed as securities. Cryptocurrencies are “replacements for sovereign currencies” like the dollar and the euro, he said.



Regardless, if Facebook and its partners do manage to overcome the regulatory hurdles that have accompanied Libra, the currency “will undoubtedly have an enormous impact on the global economy — possibly eclipsing that of bitcoin,” CryptoCompare’s Hayter said.



For Andy Bryant, chief operating officer of cryptocurrency exchange bitFlyer’s European business, Libra could start to convince people there are “other ways” of storing value than using fiat currencies like the U.S. dollar. “If that’s all that Libra achieves, I think it will be a great step forward,” he said.



This article first appeared on CNBC&nbsp;<a href="https://www.cnbc.com/2019/07/19/bitcoin-vs-libra-how-facebooks-cryptocurrency-is-different.html">https://www.cnbc.com/2019/07/19/bitcoin-vs-libra-how-facebooks-cryptocurrency-is-different.html</a>&nbsp;and is republished with its permission.

Bitcoin vs Libra: Here are the key differences between the two cryptocurrencies

HARARE (Reuters) &#8211; A Zimbabwe human rights lawyer asked the High Court on Tuesday to overturn a government decision to ban the use of foreign currencies, a move that could potentially derail plans for a new currency if the court finds in his favour.



The government has introduced an interim currency, the RTGS dollar, in a bid to end a decade of dollarisation. On June 24 it renamed the new currency the Zimbabwe dollar and declared it Zimbabwe’s sole legal tender.



For many Zimbabweans, the name Zimbabwe dollar brings unpleasant memories of 2008, when the local currency was wrecked by hyperinflation of 500 billion percent, which wiped out pensions and savings and forced authorities to adopt the U.S. dollar and other foreign currencies the following year.



Godfrey Mupanga, a member of the group Zimbabwe Lawyers For Human Rights, petitioned the court to reverse the decision to ban other currencies.



In his court application seen by Reuters, Mupanga said the decision by the national treasury and central bank was “grossly unreasonable” and should be declared unconstitutional.



The court did not immediately set a date for a hearing.



In banning foreign currencies, Finance Minister Mthuli Ncube used regulations under emergency presidential powers, which lapse in six months unless parliament passes a substantive law.



Ncube told a parliamentary committee on Monday that dollarisation was throttling an economy grappling with shortages of U.S. dollars, fuel and bread, and 15-hour daily power cuts.



Many businesses had resorted to selling goods in U.S. dollars to protect them against near triple-digit inflation as the RTGS dollar was fast losing value before the government’s surprise intervention.



Reporting by MacDonald Dzirutwe

Zimbabwe challenged in court for banning the use of foreign currencies, what you need to know

HARARE, June 25 (Reuters) &#8211; Zimbabwe’s largest labour body on Tuesday threatened protests over the government’s decision to ban the use of foreign currencies and make the interim currency the sole legal tender.



President Emmerson Mnangagwa’s government said the move on Monday to abandon a multi-currency system was an important step towards removing economic imbalances.



But many Zimbabweans are distrustful after a long succession of failed economic interventions.



“If the government does not reverse this ruinous policy immediately and announce U.S. dollar salary payments, we will immediately mobilise workers for mass action,” Zimbabwe Congress of Trade Unions (ZCTU) president Peter Mutasa told a news conference.



“The ZCTU has not moved from its position that the short-term solution is to dollarise and, as such, we are going into the tripartite negotiating forum (with government and business) to demand U.S. dollar salary payments,” Mutasa added.



In January, the ZCTU led nationwide protests against a 150% fuel price increase, triggering a violent crackdown by the army and police, which left at least 12 people dead, according to rights groups.



Mnangagwa replaced longtime leader Robert Mugabe after an army coup in November 2017, but a hoped-for economic turnaround has not materialised.



In February, Mnangagwa’s government introduced the RTGS dollar as a transitional unit before relaunching the Zimbabwean dollar. 



(Reporting by Nelson Banya; Writing by Alexander Winning; Editing by Angus MacSwan and Alison Williams)

Labour group in Zimbabwe threatens protests over ban on foreign currencies

By <a href="https://www.cnbc.com/julia-boorstin/">Julia Boorstin</a> 



Facebook is unveiling an ambitious plan to create a new digital currency and financial system to transform the way money moves around the world, and not just on its own apps.



It’s leading a consortium to create an open-source digital currency called Libra, set to launch in the first half of next year. The goal is for developers to create services for consumers to send money around the world easily and for free — with the same convenience as sending a photo or a message.



The Libra currency will not be run by Facebook, but rather by a nonprofit association supported by a range of companies and organizations. But&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=FB" class="">Facebook</a>&nbsp;does have a plan to profit from it with a new subsidiary, Calibra, which is building a digital wallet of the same name for storing and exchanging the currency.



The financial information from your digital wallet will not be used for ad targeting on Facebook’s platforms because the two divisions will be kept totally separate, the company said.



“We’ve seen internet change the game for everything that could be digitized, except for money,” said David Marcus, the leader of Facebook’s Calibra division.



“The numbers really speak for themselves. There’s 1.7 billion people around the world that are unbanked, the same number are underserved by financial services,” said Marcus, who before taking over Facebook’s blockchain initiatives ran its Messenger division and was previously president of PayPal. “Now, anyone with a cheap smartphone has access to all the info they want in the world for free with a basic data plan. Why doesn’t money work the same way?”



The announcement comes after Facebook has faced a slew of privacy issues, raising real questions about whether people will trust the social platform with their financial information. Marcus says that’s why it’s so important that Facebook not be in control of the currency.



“It may sound super controversial but there’s no better way to demonstrate the evolution of our thinking, what we know we should control and what we should not and can not control,” Marcus said. “A network that enables billions of people to move money around the world should not be something we can or should control.”What is Libra?



The new digital currency is set to launch in the first half of 2020. It will be run by a nonprofit, the Libra Association, based in Geneva, Switzerland. Its goal is to be broadly accessible, stable and secure.



Unlike bitcoin and other cryptocurrencies, which can be hugely volatile and speculative, Libra will be backed by relatively stable government-backed money.



“If you buy $50 of Libra, your $50 makes its way to the Libra Reserve,” said Marcus. “It’s designed to be stable and confer values on Libra that makes it more like a traditional currency than any of the digital currencies are now. This is the way paper money was created.”



The fact that the Libra blockchain is open-source means that anyone can build a service or app that uses the currency. The wallets that are developed to use the service will be interoperable, so you’ll be able to send money from Facebook’s Calibra wallet to any other system that accepts Libra.



Consumers will not interact with the Libra Association, but will only interact with Libra through a digital wallet or an operator. For people who don’t have the ability to digitally purchase Libra with a credit card or digitally linked account, Marcus says he expects companies in emerging markets to create locations where people can exchange Libra for cash.Who’s involved in this digital currency?



Facebook is joined by 27 other companies and organizations that are founding members. The goal is to have at least 100 companies and organizations on board for its launch next year. Each member of the association will manage one of the “nodes,” or locations where transactions involving Libra are validated.



Founding members include companies in the payments space:&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=V" class="">Visa</a>, Stripe and&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=PYPL" class="">PayPal</a>, which will be able to help merchants accept Libra. Some tech companies are also on board, including&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=EBAY" class="">eBay</a>,&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=LYFT" class="">Lyft</a>,&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=UBER" class="">Uber</a>,&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=SPOT" class="">Spotify</a>, and Latin American payments platform Mercado Pago, which could drive adoption of acceptance of the currency. Two European telecom companies are also involved, Iliad and Vodafone.



Venture capital investment companies involved have experience with digital payments: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, and Union Square Ventures. Nonprofit and academic organizations on board are focused on helping people who don’t have access to banking: Creative Destruction Lab, Kiva, Mercy Corps, and Women’s World Banking. And four blockchain companies are involved: Anchorage, Bison Trails, Coinbase and Xapo Holdings.



“The idea is that [Libra] has mass adoption — lots of trusted companies that want to join the journey, so there’s a chance of this becoming mainstream,” Marcus said.



This list of founding members invested a minimum of $10 million to fund the operating costs of the nonprofit association as well as to launch an incentive program to jumpstart the underlying Libra blockchain and to drive adoption of the currency.Facebook’s Calibra digital wallet



Facebook’s Calibra is a digital wallet that will be accessible as a stand-alone app and integrated into Messenger and WhatsApp. Facebook says it’s designed to enable anyone to securely store money for free on their phone and to allow people to securely send and receive Libra around the world, with no fees for consumers, although Facebook is considering “very low” fees for merchants.



Down the line, Marcus anticipates Facebook will offer other financial services, such as loans, from which it could profit: “If the network is successful, it will be a big opportunity for us to provide lending to all these consumers,” he said.



Facebook’s larger goal is to get people to spend more time on its platforms. This launch will enable the 2.7 billion people who use its various apps every month to more easily make purchases from the 90 million businesses on its platform. The easier it is for these businesses to drive sales on Facebook, the more likely they are to buy ads.



Although Calibra is fully owned by Facebook, it’s operating as a subsidiary kept separate from Facebook’s advertising businesses, so it can be regulated appropriately.



One key use case for Calibra is remittances. Facebook says that every year $25 billion is lost by migrants on fees from the likes of&nbsp;<a href="https://www.cnbc.com/quotes/?symbol=WU" class="">Western Union</a>. Marcus says the current process is antiquated: Immigrants send a photo of their receipt from Western Union to family members via WhatsApp so they can collect the money, minus a fee. Calibra would cut Western Union and other money-transfer services out of the equation.



A key for Calibra’s adoption is making it easy to understand exchange rate and transfer money in and out of the currency, says&nbsp;<a href="https://www.cnbc.com/2017/07/15/instagram-kevin-weil-helped-facebook-beat-snapchat.html" class="">Kevin Weil,&nbsp;</a>Calibra’s VP of Product who formerly oversaw Instagram Stories, Facebook’s successful attempt to battle Snapchat.



“The easier it is to go back and forth [from the local currency to Libra] the more confidence people will have,” he said. “If you’re banked you can imagine connecting your bank account, if you’re not banked then you can imagine a map that shows nearby money transfer experiences.”





Will this whole thing take off?



Libra is the first new cryptocurrency that has a real opportunity to bring digital currency to the mainstream, according to one of Libra’s founding partners, Anchorage, which acts as an institutional custodian for crypto assets.



It solves some of the underpinning issues that other cryptocurrencies have not been able to, to reach this promise, ” says Anchorage President and co-founder Diogo Monica.



“It’s based on a very scalable, highly efficient blockchain, that can do many thousands of transactions per second. And it’s backed by bank deposits and government securities like the U.S. dollar, so it will have low volatility,” Monica said. “The association has so many big players that already have relationships, which solves the chicken-and-egg problem of adoption.”



Monica says that Anchorage will operate one of the many nodes to handle Libra transactions and could sell its services to other members of the association for safekeeping of their Libra assets.



Marcus says if people don’t want to trust Facebook’s Calibra, there will be other apps to access the currency.



To boost its security, Calibra will have the same verification and anti-fraud processes that banks and credit cards use. To gain access users will have to have a valid government ID and use two-factor authentication, leveraging the likes of FaceID. The service will have built-in fraud production and dedicated live support. And if someone accesses a user’s account, Calibra promises to refund any lost assets.



Launching a whole new system comes with its challenges. “Every direction you look there’s stuff you have to figure out from scratch,” said Weil. “Not everyone is familiar with exchange rates, and even the folks that are, aren’t necessarily familiar with digital currency. I’ll take a lot of time to educate people.”



There’s also the question of regulatory approval. Weil says they’re talking to regulators and are in the process of getting money-transfer licenses, which they expect to have secured for a launch next year.



“People will misunderstand and think this is a Facebook thing, ” said Weil. “We incubated it, but it’s designed to be run in a decentralized way.”



This article first appeared on CNBC  <a href="https://www.cnbc.com/2019/06/17/facebook-announces-libra-digital-currency-calibra-digital-wallet.html">https://www.cnbc.com/2019/06/17/facebook-announces-libra-digital-currency-calibra-digital-wallet.html</a> and is republished with its permission.

Facebook leads consortium creating Libra digital currency, launches Calibra digital wallet

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Batanai Matsika, Head of Research at Morgan and Co joins CNBC Africa to look at movements shaping the Zimbabwean market space.

Why this analyst thinks a new currency is a bad idea for Zimbabwe

JOHANNESBURG (Reuters) &#8211; South Africa’s rand gained early on Monday in low-volume trade ahead of a shortened Christmas holiday week, as political instability in the United States curbed the dollar’s recent surge.



Stocks ended higher in trade led by resource firms.



At 1200 GMT the rand was 0.6 percent firmer at 14.5450 per dollar, compared to a close of 14.6300 on Friday in New York.



The dollar index was down 0.19 percent.



The rand, along with other emerging currencies, was hit by a wave of selling going before the weekend, with investors squaring positions and looking to offload risk holdings.



But by Monday risk demand was revived by developments in Washington, with investors fretting over a government shutdown that could continue into January and a report that President Donald Trump has discussed the possibility of firing the head of the central bank.



“A potential U.S. government shutdown, President Trump threatening to fire the Chairman of the Federal Reserve and U.S. politics in general are adding some pressure to the dollar,” said Bianca Botes of Peregrine Treasury Solutions.



Bonds closed flat, with the yield on the benchmark 2026 paper steady at 9 percent.



On the bourse, the Top-40 index rose 1.43 percent to 46,203 points, while the broader all-share was up 1.27 percent at 52,081.



AngloGold Ashanti led the blue-chip index, up 4.4 percent at 184.40 rand.



Bourse heavyweight Naspers rose 3.9 percent on the day to 2,956.30 rand.



Reporting by Mfuneko Toyana; Editing by Subhranshu Sahu

South Africa’s rand gains as U.S. political instability weighs on dollar

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The local construction sector is in need of serious renovation if it should return to its former glory, which is the view of Ken Stewart, Director at the Turnaround Management Association Southern Africa who joins CNBC Africa for more.

Gold-backed crypto-currency set for launch

JOHANNESBURG (Reuters) &#8211; The South African rand firmed against the globally hobbled dollar early on Friday ahead of the country’s credit review announcement by ratings agency Moody’s later in the day.
The rand was 0.85 percent stronger at 14.5100 per dollar at 0650 GMT, having closed in New York at 14.6350.
The rand is expected to trade between 14.3500 and 14.7000 to the dollar on Friday, NKC African Economics wrote in a note.
Moody’s is the last of the top rating agencies to have Pretoria’s long-term foreign-currency debt in investment grade.
South Africa’s stable outlook on its credit rating means there is little chance of a downgrade, Moody’s said on Sept. 13, but a commitment to fiscal consolidation at the October budget would be key to maintaining the positive rating.
The rand was supported by the slightly-better-than-expected South African manufacturing production data for August.
Globally, the U.S. dollar traded at its lowest level this month against its major peers on Friday as declining U.S. treasury yields and further losses on Wall Street soured sentiment. [FRX/]
In fixed income, the yield on the benchmark government bond due in 2026 fell 1 basis points to 9.255 percent.
Stocks are due open firmer at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 1.10 percent.
Reporting by Nomvelo Chalumbira; Editing by Ed Stoddard

South African rand firms against US dollar ahead of country’s credit review

WASHINGTON (Reuters) &#8211; The United States is concerned that increased currency swap agreements between China and African nations will reduce visibility into financial transactions and will make it harder to prevent money laundering, a senior U.S. sanctions official said on Thursday.
Marshall Billingslea, the U.S. Treasury Department’s assistant secretary for terrorist financing, told a congressional hearing that while there was greater interest in using the yuan, most African countries still found it necessary to ultimately clear trade in U.S. dollars.
He was responding to questions by Republican Representative Chris Smith, who cited a $2.5 billion currency swap agreement between China and Nigeria to facilitate trade between the two countries, and a meeting of African finance leaders in June that sought to discuss using China’s yuan as a reserve currency for the region.
Nigeria is the third African nation to agree a currency swap deal with China.
“You are very much onto something of great concern to us as well,” Billingslea replied, referring to increased currency swap agreements between China and African governments.
“That said, there remains a great desire among most of the countries in Africa to maintain correspondent banking relationships with U.S. banks. At the end of the day they still are finding it necessary to ultimately clear trade in U.S. dollars,” he said.
He said maintaining those correspondent banking ties was “our best line of defense to ensure we maintain not just a degree of transparency and visibility into the transactions in Africa but &#8230; further to ensure that anti-money laundering standards are being applied.”
Reporting by Lesley Wroughton; Editing by Leslie Adler

Why U.S is concerned about increased currency swap agreements between African nations and China

JOHANNESBURG (Reuters) &#8211; South Africa’s rand firmed more than one percent in early trade on Tuesday, matching gains by its emerging market peers as criticism of Federal Reserve rate hikes by U.S. President Donald Trump hurt the dollar and revived demand for some risk assets.
At 0630 GMT the rand was 1.1 percent firmer at 14.3700 per dollar, its firmest since Thursday, in what traders said was the beginning of a consolidation pattern with momentum indicators showing the unit was oversold.
The rand’s 3-day Relative Strength Index (RSI), used to identify oversold or overbought signals by comparing the current price to previous periods, dipped below the 70-mark overnight indicating a reversal of the recent bear trend.
The rand crashed to a two-year low last week as the financial crisis in Turkey rattled sentiment towards emerging markets broadly, adding to concerns about the impact of the U.S.-China trade spat on global economic growth.
But with Turkish markets closed for a religious holiday and anticipated talks between the United States and China seen lowering the temperature of the dispute, Trump’s central bank comments were the main catalyst.
In an interview with Reuters Trump said he was “not thrilled” with Federal Reserve Chairman Jerome Powell for raising interest rates, causing the greenback to slide to its lowest level since Aug. 9.
Bonds also firmed, with the yield on the benchmark 2026 paper down 3.5 basis points to 9 percent.
Stocks were set to open a touch lower at 0700 GMT, with the Johannesburg Stock Exchange’s Top-40 futures index down 0.1 percent.
Reporting by Mfuneko Toyana; Editing by Ed Stoddard

South African rand firmer as Trump comments hurt dollar, what you need to know…

JOHANNESBURG (Reuters) &#8211; South Africa’s rand firmed in early trade on Monday, recovering some of the losses from last week, as the dollar softened ahead of central bank policy meetings and the U.S.-North Korea summit this week.
Reporting by Olivia Kumwenda-Mtambo; Editing by Robin Pomeroy

Recovery for the South African rand following losses

Roger Southall | University of the Witwatersrand
Zimbabwe’s financial system increasingly resembles a house of cards. Were one card to give way – for instance, if South Africa’s power utility, Eskom, were to have the temerity to suggest that Zimbabwe actually pay for the electricity that it’s supplying the country – the entire edifice would collapse.
<div id="attachment_285990" style="width: 2058px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-285990" class="wp-image-285990 size-full" src="http://cnbc.africa/wp-content/uploads/2017/10/Zim-Dollar-Shutterstock.jpg" alt="" width="2048" height="1363" />Zimbabwe’s financial system is living on borrowed time.</div>
To put it another way, the government is bust. It is again printing money to cover its spiralling costs, and inflation is rising. And given that there’s an election looming in 2018, Zimbabwe’s ruling party, ZANU-PF doesn’t want to cut-back. Far from it, it wants to carry on spending, as fast as it can.
The rot goes back to the early 2000’s. ZANU-PF profligacy had been fuelled by a continuous cycle of simply printing more money, and resultant runaway inflation. Mega-inflation meant that ordinary people lost their pensions and whatever savings they had, as the Zimbabwe dollar lost its value and people resorted to barter or the use of other currencies.
Ultimately, the government faced no choice but to accept reality. In 2008 it scrapped the Zimbabwe dollar in favour of a basket of other currencies, although within a short time, this meant in effect the reign of the US dollar.
“Dollarisation” allowed for the pursuit of more rational policies by the coalition Government of National Unity which followed the disputed 2008 election. However, its control of the electoral machinery ensured that ZANU-PF won a resounding victory in the 2013 election. Within a short space of time it returned to its familiar policy mix of profligacy, corruption and populist economics.
Yet ZANU-PF faced major problems. Above all, “dollarisation” meant that the cost of Zimbabwe’s exports on international markets was high. Worse, the dramatic collapse in agricultural production since the early 2000s (following the appropriation of white farms) alongside the decimation of the country’s manufacturing industries meant that there was relatively little to export anyway. Tobacco production has recovered a little, but the quality is less than it used to be, so returns are relatively less.
Meanwhile government insistence that mines should be 51% Zimbabwean owned has done nothing to entice inward investment or boost exports.
In short, the capacity of the economy to earn US dollars by selling goods externally has fallen dramatically, and the supply of money circulating within the country has dried up. Unemployment stands at around 90%.
President Robert Mugabe’s latest response has been to replace finance minister Patrick Chinamasa, who had been warning of the structure’s fragility in ever more urgent tones. The new finance minister is Ignatius Chombo, a party loyalist, who will brook no talk of any need for structural reform.
<h2>The bond notes</h2>
Faced by a looming crisis, the ZANU-PF government has resorted to three key strategies.
One has been the issue of “bond notes” (of different denominations) by the Reserve Bank of Zimbabwe. Officially, they’re designed to swell the amount of money in circulation within the country. The problem is that apart from having no value outside the country, nobody trusts them as they have been issued by a ZANU-PF government, and it was this government that presided over the hyperinflation.
ZANU-PF’s announcement that it was issuing bond notes was met with a run on the banks as depositors sought to withdraw dollars as fast as they could. Their assumption was that this was a government ploy to reintroduce the Zimbabwean dollar. The Reserve Bank of Zimbabwe responded by limiting the amount of dollars individuals could withdraw.
People are reluctant to use the bond notes. But they’re still sometimes forced to accept them because of the sheer shortage of “real” money. As a result when they can, they rush off to the local bus station where they can sell them for dollars to currency traders – albeit illegally.
The second strategy has been the rapid expansion of country’s ability to manage electronic transactions. Its aim has been to expand the amount of money in circulation without using up “real” dollars.
Accordingly, government employees are now largely paid electronically Similarly, government employees (and everyone else) now pay nearly all their bills within the country electronically.
And Zimbabweans are rarely able to convert the notional sums of dollars they hold in the bank into real cash – unless they make use of the currency traders in illegal transactions.
Meanwhile, with the rate of inflation continuing to rise combined with the widespread lack of faith in the banks, many Zimbabweans spend their bank balances on consumer goods as quickly as possible rather than attempting to “save”. After all, if times get hard, you won’t be able to get rid of your bond notes, but you may be able to sell your fridge.
<h2>Fanciful financial system</h2>
But it’s the third strategy which the government has pursued which is really fuelling a fanciful financial system.
Since 2013, government expenditure has steadily increased year by year, despite the country earning very little internationally. The ZANU-PF government may have hoped to fund this by its old trick of literally printing money, that is, by expanding the supply of bond notes.
But such was the negative popular sentiment that the Reserve Bank of Zimbabwe seems to have restricted their issue. Supposedly the issue of bond notes is backed by a USD$200 loan by the Afreximbank, but no-one really knows how many have been issued because the central bank provides no information.
What the government has done instead is to fund its rising costs by issuing treasury bills (whereby the government touts for loans on the capital market against promises of later redemption). No-one in their right mind would want to buy them, but Zimbabwe’s banks today have little option. As inward investment into the country has dried up to a trickle, there is little else for them to spend their money on, and the interest rates that the government promises to pay are, at face value, attractively high.
The coalition government of national unity recorded budget surpluses for three of the four full years in which the opposition controlled the Treasury. For its part, the ZANU-PF government recorded deficits of USD$186 million and USD$125 million in 2014 and 2015. Recently, the then finance minister Chinamasa projected a deficit of USD$1.41 billion for 2017. As of June 30, 2017, there were USD$2.5 billion worth of Treasury bills on issue.
In other words, the spending will continue. Zimbabwe’s financial system is living on borrowed time and borrowed money. It will again end in financial ruin, as it did in 2008. But all ZANU-PF cares about is ensuring that it wins the next election and allowing its political elite to “eat”.
This article was first published in The Conversation.

Zimbabwe’s financial system is living on borrowed time – and borrowed money

A group of four West African presidents said on Tuesday they planned steps to accelerate the creation of a shared currency for the 15-country ECOWAS bloc by 2020, according to a joint statement.
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The future currency, whose name is yet to be determined, would replace the dominant CFA Franc introduced by former colonial power France in 1945 and whose treasury still backs it.
“Our region needs this unifying instrument, symbol of our shared destiny, to consolidate our customs union,” ECOWAS chairman and Togolese President Faure Gnassingbe said on Twitter.
The statement was from the presidents of Togo, Ghana, Niger and Ivory Coast who form part of a task force on the envisaged currency. A committee is planned to lead the efforts, it said.
But the president of the biggest economy in the region, Nigeria, urged caution, citing difficulties in the euro zone.
“Nigeria will caution against any position that pushes for a fast-track approach to monetary union, while neglecting fundamentals and other pertinent issues,” said Muhamadu Buhari.
West African leaders have for decades held meetings on creating their own currency in order to promote regional trade and investment, but little progress has been made.
Popular anger over the CFA franc, which stands for African Financial Cooperation in French and is seen by many in the region as a symbol of unwelcome French paternalism, dates back to at least 1994 when Paris suddenly devalued the currency.
Establishing a new currency would involve dissolving the Dakar-based West African Central Bank BCEAO for the eight countries within the zone that use it and creating another one.
The remaining seven countries in the ECOWAS bloc include English-speaking countries like Gambia and Sierra Leone as well as Portuguese-speaking Guinea Bissau. Each has its own currency.
($1 = 553.0000 CFA francs)
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Reporting by Boureima Balima; Additional reporting by Alexis Akwagyiram; Writing by Emma Farge and Peter Cooney
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West African leaders plan shared currency by 2020

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Nigeria&#8217;s annual inflation slowed for the eighth month in September, easing to 15.98 per cent from 16.01 per cent in August. Damilola Akinbami, Head of Research at Financial Derivatives joins CNBC Africa for more.

Nigerian inflation slows for eighth month in September to 15.98%

Nigeria plans to sell 140.9 billion naira ($433.5 million) worth of treasury bills at an auction next week, the central bank said on Wednesday.
The bank said it plans to offer 28.12 billion naira of three-month debt, 23.68 billion in six-month bills and 89 billion in one-year notes, using the Dutch auction system, on Sept 21. Settlement will be made next day after the auction.
The central bank issues treasury bills twice a month to help the government fund its budget deficit, support commercial lenders in managing liquidity and curb inflation.
Africa’s biggest economy has a series of debt issues lined up this year, including a 100 billion naira debut domestic sukuk it is marketing to fund infrastructure projects.
($1 = 325.0000 naira)
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Reporting by Chijioke Ohuocha; Editing by Ken Ferris
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Nigeria plans 140BN naira treasury bill sale next week

Tahiru Azaaviele Liedong | University of Bath
It’s been nearly two decades since the idea of a single currency for West Africa was first mooted. Yet the sub-region is still far from having a common legal tender. What is ordinarily a good idea seems to have fizzled into a fantasy.
Now, the story is that the single currency has been scheduled for 2020. But there is scepticism about the prospects of this coming to pass, especially at a time when economic blocks like the European Union are struggling.
The decision to create a single monetary zone for West Africa was reached by Heads of State of the 15 member countries at a summit of the Economic Community of West African States, the region’s economic commission, in Lome, Togo in 1999.
At the time, a currency union of Francophone West African Statesalready existed to facilitate economic integration among countries which use the CFA Franc (courtesy of the Communauté Financière Africaine, or the African Financial Community) as their currency.
To speed up the macroeconomic convergence necessary for a single currency across the entire sub-region, six Anglophone Heads of State met in Accra Ghana in 2000 and agreed to create a second monetary zone for the Anglophone countries, with the ultimate aim of merging with the Francophone countries. The aim was to create a single and harmonised monetary union for all of West Africa by 2004.
The implementation of that common currency for West Africa’s Anglophone countries was postponed four times before finally being jettisoned, dimming the hopes of a single currency for the sub-region.
The convergence criteria the Economic Community of West African States set for its member countries seem to be the bane of the single currency project. While the criteria are essential, they are also very high bars to scale for the countries concerned.
<h2>The hurdles to overcome</h2>
To implement the single currency, the regional economic body set some conditions.
First, it requires all countries to achieve a single digit inflation of 5% or less, which is a difficult task. In Ghana, data shows that the average yearly inflation between 2000 and 2016 was 16.92%, which is far from a single digit. Nigeria, the largest economy in the region, recorded an average inflation of 11.92% between 2003 and 2016, a rate which far exceeds 5%.
Moreover, West African countries are net importers, even of food. Nigeria, for instance, spends USD$6.5 billion annually on food imports. This sad situation compounds the inflation problem, which is made even worse by the region’s unfavourable exchange rates.
Second, the regional economic body requires all member countries to achieve budget deficit to GDP ratios of 4% or lower before the single currency is launched. In other words, budget shortfalls should be 4% or less of the total market value of all goods and services produced in the respective member countries. It will take a miracle for this to happen by 2020, three years from now.
How can Ghana, whose total debt to GDP stood at 73.3% in 2016, be expected to attain this ratio? How about Gambia whose public debt stood at 108% of GDP in 2015? Even Nigeria, which has one of the lowest debt to GDP ratio in West Africa, is far from the milestone. Essentially, budget deficits have soared and governments will continue to borrow to finance public expenditure.
If the convergence criteria are not revised to reflect the real macroeconomic situation in the sub-region, the single currency dream will remain work-in-progress for the unforeseeable future. This is because economic growth in the sub-region is slow, poverty is rife and the fundamentals for integration are far from realisation.
<h2>Is a single currency even necessary?</h2>
A single currency could help address West Africa’s monetary problems, such as the lack of independence of central banks and non-convertibility of some currencies. Ultimately, a single currency and its associated regional institutions could also boost investor confidence and promote trade within the sub-region.
But sadly, Africa does not trade with itself. Overseas trade represents 80% of total trade on the continent. Trade between African countries accounts for a woeful 10%, compared to 40% and 60% between North American and European countries respectively.
The story is not different for West Africa where trade between countries is extremely low. The sub-region’s largest partner, the EU, accounts for 37.8% of total trade. Meanwhile Nigeria, which has the largest economy in the sub-region, exported only 2.3% and imported less than 0.5% from other West African countries in 2010. Has the trend since changed? No.
In the current circumstances, the necessity of a single currency is untenable if trade is the main motivation, except the regional commission is hoping West Africa will trade more with itself or attract more investors after the launch.
But that will not happen overnight. Even the Francophone countries which have used CFA Franc as their common currency since 1945 record less than 16% of intra-union trade.
<h2>Loss of monetary sovereignty</h2>
Launching a single currency will also require creating and empowering new regional institutions, such as the West African Central Bank, to manage or supervise monetary policy for the member countries.
The regional commission has made it clear that it’s committed to do what’s necessary to achieve its goal, but what remains to be tested is whether this commitment is real or rhetorical.
The search for wealth drives African politics. Hence it will be interesting to see how politicians react when they lose sovereignty over the management of one of the major things that draws them into politics – money.
Nigeria is expected to play a catalyst role in the single currency project, but it’s also one of the most corrupt countries in Africa. In fact, nine of the 15 member countries of the sub-region ranked between 101st and 168th in the 2016 corruption index, out of a total of 176 countries.
To some extent, a single currency and a regional central bank will reduce corruption in the individual countries. The big question is, will the politicians’ greed allow this to happen? Even if the single currency is successfully implemented in 2020, spectators should not be surprised by any chaos or renunciation of earlier political pledges when the reality starts to kick in.

Op-Ed: Why the quest for a single currency for West Africa won’t materialise soon

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Shareholder activism and High drama played out at the extraordinary general meeting of Construction company, Group Five. The extraordinary general meeting was called by 25 per cent shareholder, Allan Gray which demanded the entire board resign.

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