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Zimbabwean bakers’ profits crumble amid Russia-Ukraine crisis | Business and Economy

Harare, Zimbabwe – Four months ago, Simba Muchingami was a very happy man.

Customers were queueing outside his modest bakery in Kuwadzana, a high-density residential suburb west of Zimbabwe’s capital, Harare, to get freshly baked sugar buns, doughnuts and other confectioneries.

But these days, his medium-sized electric industrial oven is often cold even by mid-morning, unlike times before when things were already rowdy at dawn.

“This place used to be packed around this time,” the 33 year old told Al Jazeera. “From 5am, we were busy. Now there is no one.”

A tray containing some doughnuts sits abandoned on the floor.

Packed fresh sugar buns are neatly arranged on a large table but there are no customers. In the corner, a worker sits idly on a chair.

In 2000, former President Robert Mugabe seized farms from white commercial farmers – who had gotten them in colonial times – in a controversial land reforms programme, and distributed them to new Black owners.

Most of them had little or no capital, leading to declining agricultural output, forcing Zimbabwe to look abroad for alternatives.

Since then, it has relied on imported wheat – as much as 40 percent of its total imports came from Russia in 2021 – for bread, a staple in the country.

After Russia invaded Ukraine in February, global supply chains were disrupted, triggering a massive jump in commodity prices – that has severely affected many countries, including in Africa.

In Harare, Muchingami has found things tough six months on. He and other bakers have hiked the price of bread to $1.30 from $1 due to the increase in prices of key ingredients.

These days, he sells half of what he used to sell even four months ago and he has let go of five of his eight employees.

‘The impact … is huge’

Harare-based independent economist Victor Bhoroma said the economic effect of the war is pronounced in Zimbabwe because of its reliance on imports.

“The impact on the Zimbabwean economy is very huge as 80 percent of the raw materials used in the local manufacturing sector are imported, hence the bottlenecks caused by the war have slowed the movement of cargo into the country,” Bhoroma said.

“The increase in freight charges and commodity prices (fuel, wheat,  soya, fertilisers, and chemicals) also means that cost of production locally has skyrocketed,” he added. “The cost of fuel has gone up from about $1.40 per litre before the war to $1.90 now.”

The southern African country is already in the throes of an economic crisis due to high inflation. Ninety percent of the country is unemployed, according to the Zimbabwe Congress of Trade Unions (ZCTU) and its manufacturing output is on a decline.

Its few manufacturing industries that relied on raw materials from farms are now also operating way below capacity due to the scarcity of raw materials.

So Zimbabwe’s bakers are feeling the heat.

Rico fat, a key baking ingredient, was $3 a kilogramme four months ago but is now $4.50/kg, says Muchingami. The price of two litres of cooking oil is now $4.80 from $2.80 a few months ago. A 50-kilogramme bag of flour now costs $35 from $28.

“Our prices have unfortunately not moved up as much,” he told Al Jazeera. “We have not been able to pass our costs to customers because our clients are vendors and they don’t understand that we need to increase the prices.”

“We are barely keeping our head above the water. If we increase our prices by Z$10 bond  ($0.0125) per dozen [pieces], it’s a war with the customers,” he says. “I have to hike prices gradually.”

In a country with a history of hyperinflation and the local currency rapidly losing value, there is a prevailing dilemma.

In 2009, the country had to ditch its currency for the United States dollar as hyperinflation decimated the former currency. And currently, the Zimbabwe dollar is trading at 800 to a US dollar on the black market.

More residents unable to keep up with costs of living, want to buy with the local currency even as more vendors unable to keep up with costs of production, want to be paid in the foreign currency.

“We charged in US dollars but the customers say they don’t want to pay that. So we sell at the prevailing black market rates [for the local currency].”

Inflation in Zimbabwe has also been on an upward trend in the past few months. It jumped to 259 percent in July from 191 percent in June due to the introduction of new currency bills into the economy and the global spike in commodity prices.

Bhoroma fears that things could get worse, and quickly.

“Considering we have elections around the corner where subsidies to farmers and households play a key role, I do not see any breaks on money printing or any reforms to build confidence in the central bank before the 2023 elections,” he said.

Alarm bells

National Foods Holdings Limited, the largest milling company in the country, has sounded the alarm already, also warning of more Ukraine war-induced price shocks.

Prosper Chitambara, a development economist with the Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ) in Harare, says poverty will increase.

“The major impact of the war in Ukraine is it’s going to slow down economic growth. Last year, the economy grew by 8 percent. On account of the war and other internal factors, overall growth will be adversely affected.”

“The war in Ukraine has worsened a situation that was already dire in Zimbabwe,” Chitambara told Al Jazeera.

But while the global economic environment remains volatile, Zimbabwe’s exchange rate and rising public spending are also to blame, he said.

“Public spending and money supply tend to increase as well when there is an election. That doesn’t augur well for the economy,” he added.

For smaller businesses such as Muchingami’s, this could be a death knell.

Apart from rising prices, he has to contend with power outages which Zimbabwe has been experiencing for the past few months.

Although he puts on a brave face, his voice betrays the strain he is under.

“If only the exchange rates could be stable for a month or two, I would be fine. When you think you have made a profit, the exchange rate changes and your earnings vanish like that,” he added.

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US to impose additional ‘costs’ on Iran amid protests, Biden says | Politics News

US president says he is ‘gravely concerned’ by reports of crackdown on protests in Iran over death of Mahsa Amini.

US President Joe Biden has said his administration will impose “further costs” on those responsible for violence against Iranian protesters, who have taken to the streets for more than two weeks in anger over the recent death of a 22-year-old woman in Tehran.

In a statement on Monday evening, Biden said he was “gravely concerned about reports of the intensifying violent crackdown on peaceful protesters in Iran, including students and women, who are demanding their equal rights and basic human dignity”.

“This week, the United States will be imposing further costs on perpetrators of violence against peaceful protestors. We will continue holding Iranian officials accountable and supporting the rights of Iranians to protest freely,” he said.

The ongoing protests in Iran were sparked by the death of Mahsa Amini, who was arrested in mid-September by the country’s so-called morality police for wearing “unsuitable attire” in the capital.

Amini’s death prompted an outpouring of anger against the Iranian government, with demonstrators demanding more civil liberties, including an end to the dress code imposed on women.

Dozens of people are believed to have been killed, while many others also have been arrested, but the authorities have not released an official tally.

On Monday, Iran’s supreme leader, Ayatollah Ali Khamenei, made his first comments on the anti-government protests, accusing the US and Israel of being responsible for the unrest and seeking to stop Iran’s “progress”.

“I say explicitly that these riots and this insecurity were a design by the US and the occupying, fake Zionist regime [Israel] and those who are paid by them, and some traitorous Iranians abroad helped them,” Khamenei told graduating cadets at a police university in Tehran.

The Iranian authorities also have denied reports that Amini was beaten in custody.

Tehran’s police chief, Brigadier-General Hossein Rahimi, said last month that she was detained for wearing tight trousers and wearing her headscarf improperly, but that claims she was mistreated were “completely false”.

Still, the US and its allies have condemned Iran for Amini’s death and the government’s response to the subsequent protests — and large rallies have been held around the world in solidarity with the Iranian demonstrators.

Last week, Washington sanctioned Iran’s “morality police”, as well as seven leaders of Iranian security organisations that it said “routinely employ violence to suppress peaceful protestors and members of Iranian civil society, political dissidents, women’s rights activists, and members of the Iranian Baha’i community”.

Canada on Monday also sanctioned top Iranian security officials for what it said were “gross human rights violations”.

This included the “systematic persecution of women and in particular, the egregious actions committed by Iran’s so-called ‘Morality Police,’ which led to the death of Mahsa Amini while under their custody”, Canadian Prime Minister Justin Trudeau’s government said in a statement.

Biden’s promise to impose more “costs” on Iran comes as talks to restore the 2015 Iran nuclear agreement, formally known as the Joint Comprehensive Plan of Action, have stalled.

The multilateral pact, which former US President Donald Trump unilaterally withdrew from in 2018, had seen Iran scale back its nuclear programme in exchange for lifting international sanctions against its economy.

While Biden had pledged to restore the deal, indirect talks have so far failed — and the US administration has continued to pile on a variety of sanctions against Tehran.

Late last week, the Biden administration promised to impose financial penalties on Iran on a “regular basis” in an effort to “severely restrict” Iranian oil and petrochemical exports.

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Credit Suisse sees shares sink over restructuring concerns | Business and Economy News

Credit Suisse Group AG saw its shares slide by as much as 11.5 percent and its bonds hit record lows on Monday before clawing back some of the losses amid concerns about the lender’s ability to restructure its business without asking for more money.

The situation prompted Swiss regulator FINMA and the Bank of England in London, where the lender has a major hub, to monitor what was happening and work closely together, one source familiar with the matter said.

Some analysts and industry sources said the bank had enough capital and cash to deal with any crises. One analyst said investors feared the bank’s ability to execute on a turnaround strategy, which it is due to reveal on October 27.

Broader market malaise is also likely adding to investor worries, they said. Global financial markets have been particularly fragile of late, where rapidly rising interest rates, policy inconsistencies, recession fears and the war in Ukraine have unnerved investors.

“The key issue is the viability of the bank following its upcoming strategic review,” wrote ABN AMRO analyst Joost Beaumont, who added that adverse market conditions have raised the “execution risk of any strategic review”.

The Bank of England, FINMA and the Swiss finance ministry declined to comment.

Analysts at Citi said that widening credit spreads could exacerbate market fears and damage counterparty confidence, as well as drive funding costs higher.

“In the long-term the further the share price falls the more dilutive any capital raise becomes (and vice versa), which constrains the magnitude of any investment banking restructuring that CS can undertake,” the analysts said.

Strategy review

Credit Suisse, one of the largest in Europe and one of Switzerland’s global systemically important banks, has had to raise capital, halt share buybacks, cut its dividend and revamp management after losing more than $5bn from the collapse of investment firm Archegos in March 2021, when it also had to suspend client funds linked to failed financier Greensill.

In July, Credit Suisse announced its second strategy review in a year and replaced its chief executive, bringing in restructuring expert Ulrich Koerner to scale back investment banking and cut more than $1bn in costs.

The bank is considering measures to scale back its investment bank into a “capital-light, advisory-led” business, and is evaluating strategic options for the securitised products business, Credit Suisse has said.

Citing people familiar with the situation, Reuters reported last month that Credit Suisse was sounding out investors for new cash as it attempts its overhaul.

Falling shares

Credit Suisse shares fell as much as 11.5 percent before coming off early lows to end down just 1 percent. Its international bonds also showed the strain, with euro-denominated bonds dropping to record lows before clawing back some losses in the afternoon.

The embattled lender’s longer-dated bonds suffered the sharpest declines.

Spreads on Credit Suisse’s US dollar bonds were quoted on Monday morning about 40 to 90 basis points wider across their outstanding bonds. One basis point (bps) is one-hundredth of one percentage point.

“It is pretty ugly for CS bonds,” one syndicate banker said.

Credit Suisse credit default swaps (CDS) soared higher on Monday, adding 105 basis points from Friday’s close to trade at 355 bps, their highest level in at least more than two decades. The CDS measure the cost to insure the bank’s bonds and were a much lower 57 bps at the start of the year. Monday’s spike was an indication of how risky investors find the bank now.

Bank executives spent the weekend reassuring large clients, counterparties and investors about its liquidity and capital, the Financial Times reported on Sunday.

That followed Chief Executive Koerner’s telling staff last week that the bank, whose market capitalisation dropped to a record low of 9.73 billion Swiss francs ($9.81bn) on Monday, has solid capital and liquidity.

Some investors said they were not panicking.

“They’ll be recapitalised by the public markets if the environment is good in a month or two, or they’ll be backstopped by the Swiss government if the environment is bad,” said Thomas Hayes, chairman and managing member of New York-based Great Hill Capital.

Liquidity ‘healthy’

JPMorgan analysts said in a research note on Monday that, based on its financials at the end of the second quarter, they view Credit Suisse’s capital and liquidity as “healthy”.

Credit Suisse had total assets of 727 billion Swiss francs ($732.7bn) at the end of the second quarter, of which 159 billion Swiss francs ($160.3bn) was cash and due from banks, while 101 billion Swiss francs ($101.8bn) was trading assets, it noted.

Still, investors are questioning how much capital the bank may need to raise to fund the cost of restructuring, analysts at Jefferies wrote in a note to clients on Monday. Also, the bank is now potentially a forced seller of assets, they said.

Deutsche Bank analysts in August estimated a capital shortfall of at least 4 billion Swiss francs ($4.03bn).

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US Supreme Court begins session amid crisis of public trust | Courts News

Recent survey finds just 47 percent of Americans trust US top court, which is taking up new set of contentious cases.

The US Supreme Court has begun a new session with public confidence in its work at an all-time low, according to a recent poll, as the top court’s decision to overturn the constitutional right to abortion continues to divide the United States.

The Supreme Court began a new term on Monday, hearing arguments in an environmental dispute, welcoming a history-making justice to the bench and taking up some new cases to be decided in the next nine months.

But late last week, a Gallup survey found that just 47 percent of Americans trusted the institution — down from the previous low of 53 percent, and 20 percentage points lower than two years ago.

A record-high 58 percent of respondents also said they disapproved of the Supreme Court’s work, according to the poll.

The findings come as the Supreme Court is more diverse than ever, Al Jazeera’s Kimberly Halkett reported on Monday from Washington, DC, where new Justice Ketanji Brown Jackson became the first Black woman to serve on the bench.

“[Brown Jackson] is only the third … African American [who] has sat on this court, which is significant in and of itself. The makeup of the court now looks more like the United States,” said Halkett, adding that the Supreme Court still has a conservative majority, however.

While conservative and liberal justices have continued to insist that the body is not political, the court’s perceived impartiality has suffered since it overturned its landmark Roe v Wade abortion rights decision in June.

That ruling set off condemnation and mass protests by reproductive rights advocates across the US, as well as a wave of restrictive abortion laws in Republican-led states.

It also fuelled calls among Democrats and other legal observers to expand the number of seats on the top court as a way to balance against its conservative stance.

According to the recent Gallup poll, 71 percent of Democrats said the Supreme Court was “too conservative”, as did 46 percent of independents. A majority of Republicans, meanwhile, said the court’s ideology was “about right”.

That polarisation shows few signs of abating, with the court’s 6-3 conservative majority expected to hear cases on several contentious topics during the upcoming session, such as gay rights, racial justice, elections, and environmental protection.

On Monday, the court heard arguments in a case that could limit the scope of a landmark federal environmental law — the Clean Water Act of 1972 — as they consider for a second time a married Idaho couple’s bid to build on property that the US government has deemed a protected wetland.

Another case scheduled for this term involves a website designer who has argued that their religious beliefs are being violated by equal protection laws that deny companies the right to discriminate against same-sex couples.

Another case could have substantial implications for the US electoral system, handing more power over the process to state legislatures.

This comes amid rising concerns over the future of US elections as a growing number of Republican candidates have embraced false claims that the 2020 election was stolen from former President Donald Trump.

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