Zimbabwe Review

Reflections on Zimbabwe

Posts Tagged ‘Economy’

Impressions of Zimbabwe in August 2009

Posted by CM on October 25, 2009

Visitors to Zimbabwe who have been fed a BBC/CNN-type diet of news about ‘The Zimbabwe Crisis’ and how everything in the country has ‘collapsed’ will be surprised at how ‘normal’ Harare looks at first glance. Driving from the airport into town, there are certainly signs of decay since a few years ago, but no immediate or obvious signs of the ‘collapse’ that certain media have in recent years hysterically, lovingly and perhaps even hopefully talked about.

Looking out of the airplane’s windows as it circled to land and on the drive into town in early August, the most obvious change for me was how areas that had once been at least semi-savannah on the outskirts of Harare had been stripped of trees. One manifestation of ‘The Crisis’ in recent years has been the difficulty in accessing forms of modern energy that had once been taken for granted: petrol, diesel, paraffin, butane, coal, electricity, etc. Their availability had been erratic for many years and their cost prohibitive, forcing many people to resort to firewood for energy. Hence the massive deforestation, which I later found was widespread.

The still newish airport is clean and well maintained, though the number of vacant boutiques compared to, for instance, Nairobi airport’s full complement of seemingly thriving over-charging boutiques was one indicator that things were not quite ‘normal.’ On the drive home from the airport there was no dramatic evidence of ‘The Zimbabwe Crisis,’ though the buildings did look shabbier than before and there were definitely more potholes to dodge on the roads. But the over-riding impression for me was the powerful natural beauty and colour of Zimbabwe, not the indices of the difficult times the country has undergone in recent years.

Having had a few days to unwind at home, I began to gradually drive around and explore my home city Harare. There definitely seemed less traffic on the roads than I remembered from a few years ago. Finding a parking spot in the city center was surprisingly easy at any time of day and the roads there were generally in very good shape, as appeared to be most of the visible infrastructure.

In town and in many of the suburban shopping centers there were many more vacant shops than before, but I was also impressed by the number of businesses that had hung on during the difficult years. But almost all had ‘diversified’ in various ways, with all selling a much wider variety of goods and/or services to survive. I thought the general level of service in shops had declined noticeably. I didn’t encounter any outright rudeness but it seemed noticeably common to be met by disinterested, bored and sometimes almost sullen store personnel. Almost all stores I remembered from a few years ago had a much narrower range of goods than during ‘the good old days,’ but many people mentioned to me that what I thought was a limited range of goods was a vast improvement from the situation a few months ago, and that the availability of goods was improving dramatically by the day, one of the early benefits of the US-“dollarization” of the economy.

While the widespread shortages of all kinds of goods was rapidly receding into the past as price controls and currency restrictions fell away, most things seemed very expensive, sometimes absurdly so. In the weeks before my visit home I had visited Europe and the U.S., as well as having passed through Senegal’s capital city Dakar,  a city not known to be cheap, and so I particularly keenly felt the comparatively high cost of goods and services in Harare. It was easy to understand why many Zimbabweans are only grudging in their praise of the ‘normalization’ that has begun to take place. “We are happy the shops are full again but we can’t afford the goods” was a frequent complaint I heard. But even as people grumble about “we can’t afford anything” the shops are certainly not empty of customers, although many merchants and traders said the level of spending was still low and still limited mainly to necessities. Yet all I spoke to agreed that the situation was significantly better than before, and dramatically better than in 2008, the period everyone agreed was Zimbabwe’s low point, with hyperinflation, shortages, violence and political tension and so on at their worst.

As ridiculously expensive as almost everything seemed to be, even in just the one month I was there prices were creeping down to more realistic levels. And if one took the trouble to shop around, which many more people were doing than I remember from before, it was possible to find widely varying prices for the same thing. A big culture change was that even in ‘formal’ shops it was possible to negotiate for price reductions, common in many countries all over the world but previously almost unheard of in Zimbabwe’s stiff formal economy. So merchants are feeling the effects of consumer resistance and growing competition from the opening up of the economy and the greater availability of goods, and they are being forced to respond by lowering their prices. In the shortage economy that had prevailed for several years, the relatively few people who could raise the hard currency to import goods became accustomed to charging huge, arbitrary mark-ups. The merchant was king, not the customer.

One of the most disheartening remaining signs of how Zimbabwe has slid was in the complete absence of a daily media alternative to the state media. There are no daily independent newspapers and at US$2 an issue, the weekly private newspapers are way out of reach of most people. Of course there is no private TV or radio so there is a huge information deficit. But this is not to say the state media dominates the shaping of opinion. Despite its near monopoly, state newspapers, TV and radio are so dull and so blatantly pro-establishment that their credibility is extremely low. The public has largely learned to sense when they are being fed propaganda instead of news, which is rather often, and to dismiss and ridicule it even if they don’t know for sure what the other sides of the story are. Even more than before, the propaganda is so crudely done that I found myself often marveling that the government didn’t find it embarrassing and a negation of its attempt to win heart and minds. The stiffness, awkwardness and the over-the-top nature of much of the state media in the support of Mugabe and ZANU-PF and against Tsvangirai and the MDC had an almost surreal, self-defeating quality in its crudeness.

President Mugabe is still ass-licked by the state media as much as ever before, and in a way that I do not think does him any credit. One big change was that Reserve Bank of Zimbabwe Gideon Gono was no longer the swashbuckling public hero the media had tried to make him out to be when he was first appointed five or so years ago, promising to swiftly bring down hyper-inflation and perform all kinds of other miracles. Even in the slavish state media Gono’s gloss had long turned dull, with him now struggling to defend his controversial legacy to a tired-of-him, sceptical public. One would have to have been there in his early days in office and to experience what a dominant public presence he came to be to understand how far the man has fallen in public esteem.

Electricity and water cuts were frequent, although even in these regards many people said I had visited when the situation was getting much better than it once was. People are inconvenienced but out of necessity have had to adjust, and the down times are handled very matter of factly. Up until a few years ago I had never even seen a fuel-powered electricity generator but now many in the cities who can afford them have them and they are widely advertised in the Press. Those who have boreholes or wells can avoid the worst inconveniences of the periods without running water, but I was shocked by the number of people who calmly mentioned having gone for months without seeing a drop of municipal water in their taps, a major cause of last year’s cholera outbreak.

Visits to some of Harare’s once-bustling industrial areas were depressing. A few years ago a quick drive through any of them would have been enough to show anybody why Zimbabwe’s economy was the sub-region’s most dynamic after South Africa’s. Now they are quiet, many companies still open but quite clearly operating at a low level. The areas do not have the bustle of before; buildings, roads and company premises are no longer maintained like they once proudly were. But from job-seekers to company owners, many people said whereas most companies were just treading water for several years, there are now signs of activity picking up as a result of the policy changes in the economy and the relative political calm.

With low productivity in agriculture and industry for several years, and given all the crises the country has undergone, it is startling to see the number and proportion of smart late-model luxury cars on the streets of Harare. There seemed a very bizarre disconnect between the economy under-performing as it has done for years and the number and types of expensive cars which would have turned one’s head even in a wealthy, ‘normal’ economy. While the signs of the lack of investment in many critical areas of the economy were everywhere, this certainly did not seem to extend to the cars many higher-ups in government and the private sector drive. I’m still trying to figure out what this says, and whether this is positive or not.

My impressions are of a tiny slice of life in Zimbabwe. For instance, I only made two one-day forays into rural areas to visit relatives, and only made one other one-day trip out of Harare during my one-month stay. There are obviously many parts of the traumatic economic and political period Zimbabwe is just coming out of that will only be fully understood by those who were there during it. But the instinctive adaptation that one “who was there” undergoes to the rapidly changing situation is also precisely why it can be hard for them to pin down and catalogue the changes, even though they will have an insider’s deeper understanding of events they were a part of. On the other hand an inside-outsider like me, visiting for the first time in about three years, can much more quickly see what is different even if he has no first-hand knowledge and experience of the factors and events that drove the change.

When I ended my previously visit to Zimbabwe, in early 2007, it was with a very heavy heart. The economy was very steadily declining and the tensions between the rival political parties escalating. That state of affairs had been on-going for close to 10 years. There was a widespread sense that the country was still going down, with no one able to guess when we would hit bottom or how bad things would be then. I left home then worried and depressed.

My feelings were quite different this time. There remain many political and economic problems but there is now a widespread feeling that the worst is behind the country. There is not the same feeling of widespread political dread and economic desperation, even though things are far from easy or back to any definition of ‘normal.’  Everybody grumbles about how high the cost of living still is, but unlike before, prices are stable and in many cases even declining, and goods are widely available, which is a very different scenario from early 2007!

I found widespread relief at the existence of the inclusive government of the major political parties, and I thought that most people were generally much less passionately partisan than I remembered. I also think cynicism about all politicians was higher and more widespread than before, which may be a good sign!

The last ten years or so have been a lost decade for Zimbabwe in many ways. And there is no guarantee that the beginnings of stabilization that are being experienced will take hold or that the country will organize itself to get close to meeting its great potential. The possibility of the political parties going back to the bitter fighting that has contributed so greatly to Zimbabwe’s misery remains very real. But when I left Harare in early September after a month at home, for the first time in many years I felt the stirrings of hope about the country’s prospects.

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Posted in business, Economy, People | Tagged: , , , , , , , , , , , | 1 Comment »

Gono: If one man cannot “kill” an economy, neither can one man “save” it

Posted by CM on October 15, 2009

Reserve Bank Of Zimbabwe Gideon Gono’s power and influence have waned in the wake of the inclusive government that has brought in MDC officials into important economic portfolios. Gono may still hold on to his title and position, but there is little doubt that his power has diminished considerably.

The once unchallengeable Gono has now found himself in the new and unfamiliar role of having all his decisions and opinions second-guessed and often derided. The man who the Zimbabwean media once portrayed as a miracle worker who could walk on water now struggles to defend the legacy of his bygone hey days.

Gono’s defence of his many controversial actions of recent years as central banker during the country’s worst period of hyper-inflation is essentially that no matter how bad things were, if it were not for his efforts they would have been far worse. He feels hurt and disappointed that Zimbabweans are not grateful to him for saving them from a much worse fate then they experienced during the tough times whose worst months were in 2008.

Here is an interesting example of his thinking about this, from a recent interview:

…Gono, who presided over the collapse of the local currency, insisted he was not to blame for “killing” the nation’s economy…He again rejected calls for his resignation after President Robert Mugabe’s unilateral decision to appoint him to a new five-year term last year — one of the major disputes facing the eight-month-old unity government.

“The immorality and irrationality of the whole argument is that ‘Gono must go because he printed money and he killed this economy. That’s a white lie because no single individual can harm or kill an economy,” he said.

Gono also stands accused of siphoning off state money into secret accounts in Asia and Europe, a charge he denies.

“Whatever I did had authorisation from the government of the day,” said Gono, a former commercial banker. He described his job as “a plumber mending burst pipes. I prevented this country from descending into chaos like Somalia.

No doubt Gono has been misunderstood in many ways, although it is far from clear in which ones. But  it is also probably true that by haughtily and flauntingly wielding as much power over the economy as he was clearly allowed to do for a while, as well as through the media over-exposure he seemed to so love, he may well have brought on to himself the genesis of his present public relations troubles.

Poor embattled Gono is no doubt quite correct to argue that he could not have single-handedly “killed” the Zimbabwean economy. Whether he indeed prevented it from desceding into the chaos of Somalia is subject to debate and will likely never be resolved.

But I found an interesting insight into Gono’s mindset. It is that he denies an individual can kill an economy, but then seems to go on to claim that an individual can save it, and that this heroic one-man deed is his real legacy to Zimbabwe. There seems a contradiction in Gono’s words in what it is possible for one man to do to/for an economy then!

I wonder if this mix of immodesty and refusal to take responsibility for anything that went wrong under one’s watch while ascribing to oneself superhuman positive achievements are not part of the attitude that have contributed both to Gono’s meteoric rise as well as his dramatic fall. I think there are lots of lessons in there about the deadly cocktail of overarching ego mixed with almost unfettered power. They can quickly take you up, but they can just as quickly bring you down.

Posted in Economy | Tagged: , , , , | Leave a Comment »

On Britain’s condition for Zimbabwean economic aid

Posted by CM on July 7, 2008

I have made no secret of my deep cynicism about the reasons for the unusual interest of the British government and media in “the Zimbabwe crisis.”

Not only is that country’s history in Rhodesia and in Zimbabwe messy and dishonorable, the shrill racial (to sensitive readers, sorry, but it is impossible to discuss Britain and The Zimbabwe Crisis without race looming large) reaction of the English establishment to Zimbabwe in general and Mugabe in particular is not only not helping the situation, it is worsening it.  Zimbabwe is in even bigger long term trouble than it is under Robert Mugabe now if it is to be “saved” by Britain.

Eager British foreign minister David Miliband is in South Africa for some meeting or other. Over the weekend he went to a camp of the victims of SA’s recent violence against African migrants to shed crocodile tears over the plight of Zimbabweans and take some pot shots at Mugabe.

It was “imperative” that a solution be found to the worsening crisis in Zimbabwe, Miliband is reported to have said after visiting the camp, which housed people from many nations, but whose propaganda value for him was clearly Zimbabwe.

Miliband is said to have added that Britain would intensify its efforts to ensure Zimbabwean President Robert Mugabe’s regime was not seen as “a legitimate representation of the will of the people of Zimbabwe.” He is said to have also called on the international community to support United States-proposed sanctions on Zimbabwe to be tabled at the United Nations Security Council in New York.

Largely harmless enough twiddling of the thumbs by Miliband.

But it is the last line of the June 7 article by SAPA, the South African Press Association, that made me sit up and take notice:

Britain does not want Mugabe to be part of any power-sharing deal, as a condition of economic aid.

Now SAPA does not explain if this has been explicitly stated by any British official, but it would not be surprising if this were the official position of the British government on conditions for releasing the one billion pounds they crudely dangled as aid during both the March 29 and June 27 elections if the right result was achieved. Clearly the Brown regime wants the Mugabe regime to go, and this is not at all surprising, quite apart from whether or not Mugabe has stolen another election. The British have many other reasons for hating Mugabe’s guts than the fact that he has been disastrous for Zimbabwe.

And I guess they are entitled to impose their own conditions for aid. But if the last sentence of the SAPA article is official UK policy, it helps to firm up my increasing opposition to Britain having any appreciable or special role in Zimbabwe, now or in the future.

Who are they to demand who will or not be part of a power-sharing deal? Mugabe may be a nasty fellow, but the over-riding concern of Zimbabweans is to find a resolution to their all-encompassing crisis. Mugabe is the person with the guns now and he is not willing to quietly go off into the sunset. As things stand now, therefore, it is simply not possible to totally rule out a role for him in some sort of power-sharing deal for the sake of moving the country forward.

What the British position suggests is that if the MDC looked at its options and decided to swallow its pride and unhappily accept a power-sharing deal that includes Mugabe (one that doesn’t seems unrealistic now, except perhaps in the minds of Brown and Miliband), Britain would with hold its toys and go off and sulk in anger at not having been able to completely ‘regime-change’ Mugabe. If this is the position, it is not only incredibly arrogant intervention in the nuts and bolts of how Zimbabweans choose to find a way out of their political impasse, it compromises the hapless, bungling MDC even more than before.

The MDC-led government that received British largesse under these conditions would do so with the deep suspicion and resentment of Zimbabweans like myself, who want Mugabe to go but who are disturbed at how the British establishment treats Morgan Tsvangirai and his MDC party as their poodles, with not a squeak of protest from the poodles! Sure Mugabe must go, but what the hell would Tsvangirai be getting us into?

It is bizarre how Mugabe’s self-serving rhetoric about Zimbabwe never being a colony again rings true when the bungling British government and the MDC seem determined to make his pronouncements a self-fulfilling prophecy!

This is why people like me feel politically homeless. There is a sense of despair about the country’s prospects with every additional day under the ruinous Mugabe, and yet there is increasing worry about what a compromised Tsvangirai would do.

The British anti-Mugabe agenda is driven partly by racial “kith and kin” considerations occasioned by Mugabe’s unprecedented drive against the white farmers (the Western world is used to dismissing ‘natives’ mistreating or killing other natives, or white people killing natives, but all hell breaks loose when white people are also brutalised by natives, especially led by one as ‘uppity’ as Mugabe). Their all-consuming ‘no deal at all with any dispensation in which Mugabe is a part’ is churlish and would significantly reduce the options that Zimbabweans must keep open to resolving their problems.

In the most polite way, I suggest we say to the British “thanks but no thanks for your bribe of aid, but your conditions for it are unacceptable for the difficult task ahead of us.”

The bloody, arrogant cheek!

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On Tsvangirai’s Wall Street Journal article

Posted by CM on April 7, 2008

Putative but not yet installed president Morgan Tsvangirai has recently become quite the writer, with recent articles in the Wall Street Journal and in today’s The Guardian.

Let’s see what might be picked up from his thoughts in the WSJ of March 21, just over a week before the recent election, in his opinion piece headlined “Freedom for Zimbabwe.”

Mr. Tsvangirai starts his article off with a bang. “Daily, the representatives of the Movement for Democratic Change (MDC), the political party that I lead, are harassed, tortured, imprisoned without trial and even killed,” he writes.

There is no doubt about the onslaught the MDC has been under for years, and I don’t doubt the harassment increased in the days and weeks before the election, despite this also being lauded as a fairly peaceful election even by the MDC itself. It is important to remember “peaceful,” meaning here the relative absence of systematic, wholesale violence, does not necessarily imply the “free and fair” conditions that we so often talk about without precise definition.

But writing for a distant US audience, the wording of the sentence I have quoted suggests that torture and murder of MDC representatives are daily occurrences. Any death linked to election violence would be one too many. But any evidence of a pattern of daily murders of MDC members would be a pogrom that Zimbabweans would surely be widely aware of, and that the world needs to be provided evidence of. Mugabe’s regime is brutal, but I have not heard even the MDC claim that its officials or members are being targeted for murder in the way Tsvangirai’s wording suggests. No one I know of from any quarter has claimed that there have been any election-connected deaths at all in the run up to the just ended election, although I certainly stand to be corrected.

The average Zimbabwean reader would understand that Tsvangirai probably did not mean to imply the daily targeting for murder of his officials that the sentence could be intepreted to mean. But I think that is precisely how the primarily American audience of the WSJ article are likely to have understood it. Americans have not only been primed to think that Zimbabwe is a war-zone, they are already conditioned to think the absolute worst about Africa. And of course in this case, this fits in with the ogre that Mugabe has been painted to be, which far exceeds the reality of his still oppressive rule.

Overstating things in the way Tsvangirai does in the first part of his paragraph is probably considered fair game in the propaganda war against Mugabe, who is himself not above these sorts of tactics. And it allows a Tsvangirai who had expected to be sitting in the presidential palace at this point after the election, to cast himself to the Americans as a particularly brave fighter against the image-battered Mugabe.

Tsvangirai is indeed brave but pandering to American ignorance and prejudices about Africa in this way is a most unfortunate way to wage his propaganda war against Mugabe. The way this careless kind of tactic feeds American stereotypes about Africa and distorts the reality in Zimbabwe does at least as much long term damage as whatever benefits it might win Tsvangirai in the short term.

Before I am beyond the first paragraph of an article I am hoping will give me helpful insights into the thinking of a man who hopes to get my vote and to be my president, I am already asking myself, “What is he trying to do with this kind of language?” Assure and woo potential investors from among the WSJ’s prestigious readership? Ingratiate himself with the US political establishment? Rally the support and sympathy of Americans for his fight against Mugabe? Whichever it is, I am already very uncomfortable that he so makes his point by the kind of careless distortion implied by the phrase in his article I have picked on, whether the implication of a campaign of systematic daily murder was deliberate or just an “innocent” slip.

Having lived in the US, one of the things that would make my blood boil most frequently were just the kind of often crude stereotypes about Africa that pertain there, and that Tsvangirai walks right into by overstating the security situation in Zimbabwe at the time of writing his article. So after paragraph one of the article, I am not feeling too favourably disposed towards my possible future president.

Maybe I’mjust uptight, overly sensitive and critical of Tsvangirai and need to give the man a break. Let us move along with his article.

Tsvangirai then spends the bulk of the rest of the article highlighting Zimbabwe’s main problems over the last few years, Mugabe’s role in bringing them about and in broadly outlining how he and the MDC propose to address them. The way he identifies the economic issues and his prescriptions no doubt were sweet music to his WSJ readers. The article displays a faith in classic IMF-World Bank-US style thinking about how nations should get ahead.

…committment to protecting persons and property…compessions for those who lost property in an unjust way…balance between reconciliation and accountability…restoring the independence of the judiciary…slashing bureaucratic red tape…will open economic opportunity to all Zimbabweans…taming the government’s appetite for spending…reduction of the number of ministers to 15…government will have to live within its means…Reserve Bank of Zimbabwe must become independent of the government…Most state-owned companies are woefully inefficient, will be privatized or shut down…

Most of this sounds harmless enough and is the kind of non-specific campaign rhetoric one would expect from any politician following the script of the reigning paradigm of how the world is currently economically structured. Tsvangirai gives no indication that he recognises that there has been a raging debate across the world about the effectiveness and benefits of classic IMF thinking about how to alleviate poverty and foster widespread economic growth in developing countries. Many of the most dynamic developing countries actually owe their progress to discarding classic IMF-style advice which assumes free markets that all economies have equal access to, to give just one example. The need to slash public spending, another central tenet of that kind of economic dogma is now questioned by many economists.

However, even for those of his broad recovery proposals I am not completely at ease with, I still grant that countries that intend to get ahead economically must just be pragmatic enough to accept that they must master the rules of the game as it is played in the world today, rather than hope that they can first change those rules. This means finding ways of manouvering around the many parts of that game that are “unfair,” rather than just whining about the unfairness. This is a big part of the lesson we can learn from the emerging economies of Asia.

But I have the uncomfortable feeling that Tsvngirai is pandering to his American audience, trying too hard to impress and win over a foreign audience before he has won me, a Zimbabwean, over. The WSJ is surely a prestigious publication to get an article published in, but how relevant is that for a person running for president of a country in southern Africa? When last did Mr. Tsvangirai write an article for a Zimbabwe-dedicated website or publication ? Or even for any publication primarily read by Africans, whether on the continent or abroad. My point is not at all that he should not have written for the WSJ, but that this to me is a further reason to worry about his whole orientation.

I do not want another president who is a paranoid isolationist in the mould of Mugabe. But I do want a president who is more careful and smarter about his engagement with the Western world than I believe Tsvangirai to be. That for me partly means being cognisicant of Africa’s history and how being patted on the head as a good boy by Western powers can be an initially flattering blessing that may come back to haunt a naive politician. I want a president who has a deep knowledge of African history and of Africa’s present day aspirations to engage positively with the West, but with a cool, wary head, not a childish sort of over-excitement.

I know I am only supposed to be concerned about how the country can effect its rejection of Mugabe at the ballot last week. I am choosing to look ahead beyond that to try and say, “Tsvangirai, beware;watch your back.”

Posted in Politics | Tagged: , , , , | 2 Comments »

‘Cash barons’ are only a symptom of deeper Zim economic malaise

Posted by CM on December 29, 2007

Things continue to spiral out of the control of the authorities in Zimbabwe in regards to the economy. They try all sorts of quick fixes for the multiple and increasing number of holes, but the bleeding seems to only get worse, whether in regards to inflation or general shortages of all kinds of goods.

The latest and most severe currency shortage to date has spawned all sorts of bizarre happenings. I say “latest” because I was recently reminded that Gideon Gono was brought in as central banker and general economic trouble shooter a few years ago in the midst of the first cash crisis, though not as severe as the current one. Lauded as a miracle worker by the state propaganda services then, Gono’s one-time idolisers are increasingly turning on him as it become clear to all that he cannot tame the economy’s multiple problems.

Where have all the Zim dollars gone to? Why must people queue endlessly to withdraw their own money from their bank accounts?

As in so many other areas of life in Zimbabwe, it is hard to get straight answers to these kinds of basic questions. But it seems a part of it is just that the local currency has so deteriorated in value against hard currencies (today one website says one (1) British pound is equivalent to seven million (7, 000,000) Zimbabwe dollars) that people who need foreign currency for one thing or another just need huge amounts of the Zim dollar to do the exchange. Currency speculation is no doubt also a big part of the reason for the “disappearance” from circulation of huge quantities of cash.

I don’t know if the fact that the amount of currency printed and in circulation is just failing to keep up with inflation and the Zim dollar’s continuing depreciation is also a significant factor. But whatever the reasons for it, it is certainly strange for the citizens of a country to fail to get their hands on their own currency!

We now have the bizarre situation wherein it is a reason for suspicion for a person to have large amounts of cash, and yet the situation forces one to horde it if one is involved in any kind of trade, particularly in import. The silly new term “cash baron” is supposed to conjure up the image of a sinister black marketeer who keeps large amounts of currency in order to deal on the “illegal” forex black market.

But one could easily make a case for the fact that it is not the dealing of forex outside official channels that is a problem. It is instead the ridiculously, unrealistically low exchange rates of the official channels that make it pretty much inevitable that anyone with forex will avoid those official channels like the plague and seek to sell it on the “illegal” black market. With so little forex available on the official market, buyers must resort to the black market. As the local currency hourly deteriorates in value from 10,000+% inflation, those buyers need higher amounts of Zim dollars everyday to purchase the same amount of hard currency.

By criminalising human behaviour that is entirely predictable under the circumstances, the authorities create a whole new list of “crimes” but also create an impossible situation for themselves. The reasons and incentives for dealing on the “black” money exchange market are so much more powerful than the fear of running afoul of the law that everybody is now technically a criminal in this regard, including the central bank and the government itself. In such a situation the applicable laws are nonsense, only useful for “getting” a few deliberately targeted people for show, but absolutely useless as a deterrent to the “crime.” It cannot and is not working.

We have now got accustomed to saying and believing “Zimbabwe has a shortage of foreign currency.” And indeed the country earns much less from exports and tourism than it is used to, and no longer has access to many of the sources of international credit it could count on in previous years. But it is also clear from the size and thriving nature of “the black market” that if you are willing to pay the free market rates, foreign currency is available in Zimbabwe. What is in real short short supply is forex at the low, government-stipulated rates that no sane person would willingly sell their hard currency at.

There is the interesting case of the 24 year old woman who was recently arrested and demonized in the Zimbabwean media for being a “cash baroness.” She was caught with Z$10 billion of the new $500,000 notes within days of this new currency denomination being introduced. This was despite the daily bank withdrawal limits for individuals being only Z$50 million (US$35 at today’s rate) and double that for companies.

In other words, if she had that much money in her account, it would have taken her 100 withdrawal-days to get it out through legitimate channels. It is not thought she bought it off the streets for forex because (1) the Z$500,000 denomination currency note was only a few days in circulation and not then widely available and more importantly, (2) the Z$10 billion was still neatly, tightly packed in its original Reserve Bank of Zimbabwe plastic wrapping!

The implication is that someone, unlikely to be her, either got much more from a bank than they should have been allowed, or that they got it straight from the RBZ itself! Indeed, there have long been allegations that the RBZ is one of the biggest customers of the black market forex dealers, despite Gono’s regular rhetorical huffing and puffing against them.

In an open society the several stunning revelations of the Mutekedeke case would have brought down the whole elaborate house of cards that is the foreign currency trading system in Zimbabwe. It would have exposed many of the country’s high and mighty as people who say one thing while regularly doing the exact opposite, to their considerable benefit and to the great suffering of the country.

The term “cash baron” may be meant to suggest an evil saboteur out to deliberately wreck the economy and inconvenience people. But the phenomenon of hoarding large amounts of cash is not the problem per se, but just another symptom of all the structural things that are wrong in the Zimbabwean economy as well as its overall body politic.

But for whatever it is worth, the internal contradictions of the whole system of the country’s rulership are becoming clearer by the day.

Posted in Economy | Tagged: , , , | 4 Comments »

China takes controllling stake in Zimbabwe chrome firm Zimasco

Posted by CM on December 26, 2007

Zimasco has long been an important but troubled mining and industrial asset for Zimbabwe. Shifting world metal prices, the need for expensive plant capital investments for which there was no money and political interference in management are just some of the issues that have made the steel and chrome company a perennial under-performer.

Now comes news that the Chinese have taken it over:

Sinosteel Corp, China’s biggest chrome importer, said it acquired 92 pct stake in Zimasco Consolidated Enterprises Limited (ZCE), the Mauritius-based holding company of Zimbabwe’s Zimasco. Under the deal, Sinosteel has the option to buy the remaining 8 pct of ZCE over the next two and a half years, the company said in a statement.

Zimasco is Zimbabwe’s largest chrome producer with annual refined chrome output of around 592,000 tons.

In November last year, Sinosteel signed an agreement to pay more than US $200 million for a 50 pct stake South Africa’s Samancor Chrome Co.

Forbes

The Chinese will presumably be willing and able to do the plant improvement that has long been necessary but neglected. With virtually complete ownership, they will run it as they see fit for profitability, even if it results in conflicts with locals over managerial styles. Politically they are covered by Zimbabwe being now so dependent on Chinese largesse in many areas at a time when it is in diplomatic isolation from much of the world.

Its interesting that the Chinese have been able to effectively take complete of of an asset long considered a key, if ailing, strategic mining asset at a time of a lot of talk about indigenous Zimbabweans having at least a 50% stake in such investments!

Perhaps in this case the technical detail of the Chinese having bought Zimasco’s off-shore holding company gives them some loophole around the Indigenization Bill. Or just as likely, it could be a case of political rhetoric giving way to the reality of the power of capital!

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Naming and shaming Zimbabwe’s alleged top crooks

Posted by CM on December 19, 2007

The Zimbabwe Today blog has an interesting story titled “Zim Mafia.”

Excerpts:

Most of us here in Zimbabwe live in, or on the verge of, bitter poverty. But there are … those who don’t struggle … who glide over our potholes in Mercedes comfort, who live in elegant homes tended by armies of servants, who feed themselves from well-stocked freezers, and who comfort themselves in times of stress by reciting the numbers of their Swiss bank accounts.

… the Zim Mafia… are members of a special clique – all of them politicians and officials from our ruling Zanu-PF party – who take advantage of their positions of power to rake in millions of US dollars.

The article then proceeds with a ” far-from-comprehensive run-down on the graft, corruption, double-dealing and sheer theft that is the mark of our rulers…”

A lot of the personalities named have featured prominently in allegations of all sorts of business deals that are said to be shady. The majority of Zimbabweans, disillusioned and depressed about affairs in their country, will have no trouble believing the allegations made. Beyond that it is very difficult to tell the veracity or otherwise of the allegations, though they make for salacious reading.

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Zimbabwe among world’s least competitive economies

Posted by CM on December 12, 2007

Zimbabwe has been named among the worst competitive countries in a survey of economic competitiveness across the world.

The troubled country, which showed so much promise until just a few years ago came out close to near bottom – with a ranking of 129 out of 131 surveyed economies under the World Economic Forum (WEF)’s Global Competitiveness Index (GCI) for the period 2007-2008.

The dismal rating shows a sustained slide in the economic competitiveness stakes for Zimbabwe, which ranked 112 in the last GCI index for 2006-2007.

Also competing for stakes at the bottom of the index were countries primarily in sub-Saharan Africa, such as Mozambique, which ranked 128, Burundi, a point behind Zimbabwe and Chad, which anchored the index at 131.

In Africa Tunisia topped the rankings followed by South Africa, which despite showing strong economic growth lost out to rivals from 36th position last year to 44th this year. Morocco followed up at 64 and Botswana at 76.

The US regained its status as the world’s most competitive economy rebounding from sixth place last year and knocking off Switzerland from the top spot owing to strong innovation and excellent universities. The Swiss were second this year, followed by Denmark, Sweden, Germany and Finland.

Zimbabwe, which is grappling with an agonising eight-year economic catastrophe, has been scoring poor marks on all recent global economic indices. In September the country ranked 31st out of 48 countries surveyed in the inaugural annual Ibrahim Index of African Governance, published by the Mo Ibrahim Foundation.

Financial Gazette_Nov7_2007

 

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Harare’s million dollar beer

Posted by CM on December 12, 2007

by Michael Clemens

What’s it like to live in a country whose economy has been shattered by its own leaders? Here’s how a beer purchase in Zimbabwe looks these days:

That’s $1 million Zimbabwe dollars, in four chunky packs of Z$500 notes–collectively, the price of a single beer purchased at a bar in Harare on November 24th. When the beer was quaffed, at the “official” (read: “fantasy”) exchange rate, that was about US$33. At the “black” market exchange rate, that was just under US$1. Today, just twelve days later, it’s only worth around twenty five US cents. Such an economic Twilight Zone forces anyone running a business with the smallest international component to choose between illegality and immediate closure.

Things have gotten so bad that, in a stunning development, enterprising employees of the Reserve Bank of Zimbabwe are selling Zim dollars at the unofficial rate inside the central bank itself to top up their scant wages.

The reason Zimbabwe has the highest inflation on earth is that the regime of President Robert Mugabe is recklessly printing money to finance its expenditures. High inflation has been shown to markedly increase poverty because nominal wages never quite seem to keep up with galloping prices. But why should mass poverty concern Mr. Mugabe, whose chauffeur whisks him around in a Rolls Royce convertible?

Most poverty on earth is so complex that its roots are difficult to trace. In Zimbabwe, the source of the recent surge in poverty is crystal clear. One can only hope that the death-grip Mr. Mugabe holds on his country will soon wither. Until then, Todd Moss and Stewart Patrick have some ideas on how to prepare for the aftermath.

Center for Global Development

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Africa-Europe EPA discussion bypasses Zimbabwe

Posted by CM on December 12, 2007

The controversial Economic Partnership Agreements that are being negotiated and signed between the European Union and various regional groupings in Africa will likely fundamentally change relations between the two continents if they are implemented. A lot of the controversy around the negotiations is because the two sides have very different ideas on whether the EPAs are a good thing or not.

The EU insists it wants them signed by December 31 because that is the World Trade Organization’s deadline for the EU to liberalise trade with its former colonies in the ACP countries. The WTO ruled in 2002 that the preferential trade terms (low or no tariffs on exports to the EU) Europe gave to those ACP countries was unfair to other developing countries trying to export their goods without such generous terms. It gave the EU until the end of this year to negotiate new trade terms with former colonies.

The African countries are all worried that the concessions the EU is asking of them to continue to have relatively low tariff access to EU markets would cripple them. A major one is reciprocal low-tariff access of EU goods to African economies. The African countries are understandably worried that this could wipe out whatever industries they have, as they would not be able to compete against Europe’s more sophisticated production processes.

These are boring issues for the average person anywhere, but no one in Africa will be unaffected by what eventually is agreed upon. The EU remains by far the most important export market for Africa’s goods, which are mostly raw agricultural commodities.

Zimbabwe as one of Africa’s more “developed” economies should have been at the forefront of stating Africa’s position on the EPAs. There are many solid arguments in favour of Africa fundamentally changing its trade terms with Europe, but there also many reasons to question whether the EPAs proposed by the EU are the best way to do so.

The arguments for and against the EPAs would not be substantially different in Zimbabwe from those in, say, Kenya. That country’s press has done a decent job of laying out all the issues at stake in the negotiations. But because of Zimbabwe’s crippled economic state, the repercussions of the EPA may be even more dire for the country than for many others.

Zimbabwe has joined the list of reluctant African signers. The prohibitively raised tariffs the EU was threatening to charge goods entering its market from January 01, 2008 would so cripple African export competitiveness that there really was never any doubt that most countries would sign. This was especially true of those like Kenya and Zimbabwe that are considered “middle class” enough to not qualify for other concessionary trade term schemes with the EU.

My main point in this connection is how the immediate political mess in Zimbabwe and its effects have so consumed our attentions that we have little time and energy left to focus on other things that will determine our future as much as the current political maneuvering.

One of the few articles dealing with EPAs from a Zimbabwean perspective is

EPAs Bringing in Old Issues Through Back Door.

It sets out the general fears common to all African countries about the new trade regime that the EPAs are ushering in.

Excerpts:

 

With an economy tottering on the brink of collapse and an unenviable political situation, civil society organisations in Zimbabwe have every reason to worry about the implications of the interim agreement on trade in goods that their country has just signed as part of the economic partnership agreement (EPA) with the European Union (EU).

Andrew Mushita, director of the Community Technology Development Trust (CTDT), a non-governmental organisation with interests in trade and technology issues, says that Zimbabwe “cannot compete with the EU on an equal footing because of our economic situation.” He is also worried about the rearrangement of regional configurations as that weakened the position of African countries further.

Other organisations have also added their voices, saying that the EU will emerge as the biggest winner. It will be folly for countries like Zimbabwe with an economy in tatters to hope for any “heavenly manna” to arrive via the EPAs.

“Zimbabwe is just like any other country in the Southern African Development Community (SADC) or in East and Southern Africa (ESA) grouping. It is not ready to sign an EPA. Opening up our markets in the present state will only lead to the further exploitation of our raw materials,” said Joy Mabenge, executive director of the Zimbabwe Coalition on Debt and Development.

Mabenge says Zimbabwe needs more time to resolve its economic problems before it can make commitments like the EPAs. The EU is only interested in African raw materials, which it will return to Africa in the form of processed products at exorbitant prices. Africa still has to strengthen its economies and industrial bases.

“Let’s get our economies to function. Then we will be able to compete on an equal footing with Europe. This issue is being looked at from a simplistic point of view,” Mabenge argues.

Several Zimbabwean analysts say the current economic problems will further hinder Zimbabweans from benefiting from the EPA. Several Zimbabwean companies face demise due to government’s populist policies, which have led to shortages in foreign currency to procure essential industrial components. Zimbabwe’s inflation rate is 7,800 percent.

These problems, analysts say, make it impossible for Zimbabwean companies to compete in the EU market. A sector such as agriculture, which has witnessed a rapid dip in fortunes since 2000 after the introduction of the government’s “land reform” programme, will be forced to compete with subsidised produce from Europe.

Similarly, the beleaguered manufacturing sector will have to take on an influx of European commodities.

The Zimbabwean parliament was recently told at a caucus meeting that the EPAs will take away some of the country’s guaranteed markets.

One organisation has adopted a different position on the EPAs. The Trade and Development Studies Centre based in the Zimbabwean capital Harare does policy research and analysis, focusing particularly on the relationship between trade and development, aid and development, poverty alleviation and welfare.

“These EPAs are not coming from nowhere. They are the result of a gradual build-up through several conventions. There is nothing wrong with the EPA. The problem is its implementation. It can be developmental or have the opposite effect,”  said Masiiwa Rusare, the director of the Trade and Development Studies Centre.

“We should keep an eye on what happens. What is needed is to encourage the government to diversify its trade partners and create more options.” But Rusare concedes that regarding market accessibility and agriculture, ensuring that the EPA deal works fairly will be a Herculean task.

“It’s like taking a non-boxer into the ring with (boxing champion) Mike Tyson. The results are obvious,” Masiiwa says.

I thought the article could have gone much deeper to examine those issues from the detailed particular perspective of a Zimbabwe which is on its knees economically. But then again, it would not have been realistic for one article to go into all the intricacies of the EPAs. Other countries have had the benefit of the EPAs being discussed in the media, at conferences and so forth over several months, so that an interested citizen did have access to information on the issues and implications. Zimbabwe has suffered not only from the politics-preoccupation and the struggles of daily survival, but also from having a severely limited press.

This is just another sad indication of how Zimbabwe continues to marginalise itself from significant world affairs. These are the kinds of issues that the president of a country should be engaged with, not basking in how he was mobbed by the media at the recent Africa-Europe Lisbon summit for his notoriety!

 

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