Zimbabwe Review

Reflections on Zimbabwe

Posts Tagged ‘cronyism’

What the African experience should teach us about economic ‘transformation’

Posted by CM on January 8, 2008

This article was featured on South Africa’s Moneyweb almost a year ago now, but it is timeless:

James Myburgh
07 March 2007

In Business Day Professor Sipho Seepe began an article on Black Economic Empowerment with the claim that: Postcolonial experience indicates that political transformation is meaningless unless it is underpinned by economic transformation.” One does rather wonder which particular African country’s experience Seepe was thinking of when he made this peculiar observation:

Was it, for instance, Tanzania where Julius Nyerere transformed the economy by nationalising the whole thing in 1967?

Or was it Kenya where the economy was gradually transformed, from 1967 onwards, by slowly squeezing the Asian (Indian) population out of the economy (and the country) through the application of restrictive trade-licensing and citizenship laws?

Was it Uganda where Idi Amin suddenly transformed the economy through the simple expedient of expelling the entire Asian population? In August 1972 Amin simply announced that they all had to leave the country within ninety days. This action had been precipitated by a dream, he said, “that the Asian problem was becoming extremely explosive and that God was directing me to act immediately to save the situation.”

Was it Zambia where Kenneth Kaunda’s “Zambian Economic Revolution” saw the takeover of smaller outsider-owned firms and businesses in 1968, the nationalization of fifty-one percent of the big mining companies in 1969, and the expropriation of the other forty-nine percent in 1973?

Was it Zaire where Mobutu transformed the economy in 1973 by ‘Zaireanising’ it? According to Michela Wrong he simply declared that all “foreign-owned farms, plantations, commercial enterprises – mostly in the hands of Portuguese, Greek, Italian and Pakistani traders – should be turned over ‘to sons of the country’.” This was followed by the confiscation of largely Belgian-controlled industrial sector.

Or was it Zimbabwe where the economy was finally transformed through the dispossession of the (largely white) commercial farming class?

(One of the few countries in post-colonial Africa which did not try and ‘transform’ its economy, but grew and nurtured it instead, was Botswana.)

“Experience” is defined by the Shorter /Oxford English Dictionary/ as “the observation of facts or events, considered as the source of knowledge.” And, if the facts and events of the last fifty years indicate anything, it is that the pursuit of complete economic ‘transformation’ has brought severe decline to the African continent.

It is worth remembering that many post-colonial African countries were doing pretty well, kind of like South Africa is doing today, up until the point at which expropriation took effect. As Wrong writes of Zaire: “Until Zaireanisation, the economy had grown by an average of 7 per cent a year. Look at a graph of just about any indicator and there, in 1974, is the sharp peak, followed by a long, slow, unstoppable swoop that continues to this day… Before Zaireanisation, corruption, while a problem, had seemed to observers on a par with that witnessed in many other emerging African states. But in the generalised climate of impunity created by this botched economic experiment, sleaze…was about to become the most striking characteristic of Zairean society.”

The reasons why these acts have been so uniformly destructive to Africa were set out by the economist P.T. Bauer a couple of decades ago. Bauer’s argument, as summarised by Amartya Sen, was that the extensive politicization brought about by this kind of large-scale redistribution “diverts people’s energies and ambitions from productive economic activity to politics and public administration. It also encourages attempts to benefit from politically-organised redistribution, or to escape its consequences. An even more evident result is that these policies systematically transfer resources from people who are economically productive to others who are less so.”

This kind of crude redistribution also requires the rulers to abrogate for themselves extensive coercive powers, and to dilute constraints on their actions such as property rights and the rule of law. Thus, although the original intention is to create a more equal society, the actual effect is to exacerbate the “inequality of power between rulers and subjects.”

The article speaks so eloquently to the current Zimbabwe situation that it really needs no commentary.

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UK Sunday Times ties itself into a knot over Mugabe

Posted by CM on November 11, 2007

In the hysterical style we have now become accustomed to from sections of the British press, the UK Sunday Times of November 11 screamed “Barclays bankrolls Mugabe’s brutal regime.”

Excerpts:

Barclays is bankrolling President Robert Mugabe’s corrupt regime in Zimbabwe by providing substantial loans to cronies given land seized from white farmers.

The British bank lent £750m to the country’s new landowning elite in the first half of this year, mostly through a government scheme to boost farm productivity.

Many of the farms now funded by Barclays were forcibly taken by mobs organised by Mugabe’s Zanu-PF party. They were distributed to leading figures in the regime, even though the policy was intended to give farms to landless black Zimbabweans. The beneficiaries included Mugabe himself, who is said to have three estates.

Despite worldwide condemnation, Barclays, which faced criticism for operating in South Africa during the apartheid years, has remained one of only a handful of banks with extensive operations in Zimbabwe. It has recently been opening new branches in the country.

Barclays is required to finance the loans under Aspef (Agricultural Sector Productivity Enhancement Facility) as part of a set of conditions laid down by the Zimbabwean government which permit it to operate in the country, where it made £34m in profit last year. Its £750m Aspef loans are an increase of 17% on the previous year.

A spokeswoman for Barclays said the bank had operated in Zimbabwe since 1912 and had 1,000 employees and a network of 20 branches serving 150,000 retail, business and corporate customers in the country.

Now, we all know Mugabe is not your most cuddly world leader, for all sorts of reasons. We also know that the mere mention of his name makes the British press apoplectic with rage, for all sorts of reasons. But this story is a classic example of how papers like The Times simply can no longer be taken seriously when reporting about anything to do with Mugabe.

Oddly enough, it was someone writing a brief response in The Times’ own readers’ forum who provided the factual details and context which the paper should have done to make its story more credible:

Barclays does not deserve this criticism.

I believe the article grossly overstates the amount advanced to farmers. Most likely the figure of £750m was derived based on the unrealistic Zimbabwean official exchange rate. Barclays Zimbabwe does not have the capacity to fund a loan book of that size. (And most likely, nor does the country’s agricultural sector currently have the capacity to utilise that kind of money! CM)

Besides, agricultural loans are not funded by Barclays, but by the Reserve Bank of Zimbabwe (RBZ). Barclays, like any other commercial bank operating within Zimbabwe, is disbursing ASPEF loans to farmers on behalf of the RBZ. Banks in Zimbabwe are reluctant to fund agricultural operations as the risk of default is perceived as high.
(Generally all over Africa and in many places beyond, agricultural lending, especially to inexperienced part-time farmers with little collateral, is not something banks rush out to do! CM)

We should also note that Barclays Zimbabwe operations are largely funded by deposits mobilised from the local market, not offshore credit facilities as implied by this article. (Barclays has found Zimbabwe a tough but obviously lucrative banking environment, which is no doubt why it continues to open new branches, with profits earned in the country, not those of British investors, banking customers or taxpayers. CM)

Mike, Harare, Zimbabwe

Times reader “Mike” was too polite to say so, but it was kind of mischievous of the paper not to tell us if its fantastic pound sterling figures were converted from Zim dollars. If so, as is likely to be the case, what exchange rate did they use? If they used the Zimbabwean government’s low, widely ridiculed and ignored rates (approx.Z$62,000 = £1), then one could see how they could come up with the incredible figure of 34 million pounds sterling as Barclays’ Zimbabwe profit for just one year. Based on what would be truly fantastic returns, the British ought to be encouraging the bank, and others, to be increasing their investments in Zimbabwe, not scaling them back!

But if the conversion from Zim dollar to pound sterling were done at the rapidly changing “parallel market” rate that almost everybody uses (today it is at Z$3,200,000 = 1£) then The Times figures would look much less formidable and impressive, by at least 50 fold!

Just on the basis of leaving out this huge and important exchange rate discrepancy, the Times story’s figures are largely nonsensical as a reflection of doing business in Zimbabwe.

So, Times, we know you can’t stand Mugabe. A lot of people in Zimbabwe share your feelings. But it is nauseating when a paper of your stature has to appear so desperate to attack Mugabe on the thinnest grounds that it must write non-stories such as this. Apart from the exchange elements I have limited my comments to, there is nothing in the story that has not been known or written about thousands of times over the years now. I am puzzled at the attempt to hype this recycled information to appear as if it is new.

And it took The Times three reporters to write this non-story!

When there are so many solid grounds on which to criticise Mugabe, it is a measure of The Times’ standards of Mugabe-bashing desperation that it should feel the need to sink this low.

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