Back to Index

How Mugabe & Co. prosper
Greg Mills, International Herald Tribune
June 12, 2007

http://www.iht.com/articles/2007/06/12/opinion/edmills.php

Southern African diplomats are engaged in trying to mediate a peaceful resolution to the Zimbabwe crisis. Progress will depend on the appetite of Zimbabwe's elite for change and the extent of their desperation. Unfortunately, many are making a lot of money out of the country just the way it is.

The conventional wisdom is that Zimbabwe is at the point of imminent economic and social collapse, and that this will trigger widespread unrest and deep-seated political change. Such wishful thinking does not intersect with rational analysis.

On paper, Zimbabwe has moved from breadbasket to basket-case, its once fast-growing economy shrunk by half in just a decade. Ten years ago, Zimbabwe was a net food exporter, with a buoyant agriculture and mining sector. Today, agricultural output is less than half of what it was at its peak in the late 1990s, and tobacco, the main export crop, is just one-fifth.

The budget deficit is an unsustainable 50 percent of gross domestic product. Inflation is now more than 3,700 percent. Four out of five Zimbabweans are unemployed. Half of the country's 11 million people are dependent on foreign food aid. More than three million people have fled the country. One in five of the population is afflicted with HIV or AIDS. Life expectancy is down from 60 at independence in 1980 to 36.

How then are a large number of people still making money? The politically well-connected can purchase the U.S. dollar at the official rate of 250 Zimbabwe dollars at a time when the market rate is at least 100 times greater. This enables arbitrage on everything from luxury goods to essential imports, notably fuel from South Africa.

It does not matter that there is insufficient foreign exchange for basic food and power imports. The state relies on international largess in the form of aid and credits to ensure that these keep flowing.

This system requires political connections and ensures loyalty. It demands economic schizophrenia, operating simultaneously inside and outside the market economy. Few legitimate businesses can turn a profit in Zimbabwe.

This explains why President Robert Mugabe is still popular among his followers. They have been bound to him by the distribution of previously white-owned farms to his supporters. More than 3,500 farms have been seized by the state. The country's 4,000 white farmers were always easy prey in a country where the politics of Mugabe's ruling Zanu-PF party are defined by the 20-year liberation war against white rule.

This also explains why Mugabe is going all-out to retain power, contrary to the interests and apparent demands of his fellow leaders in southern Africa. His stake in democracy - leveling the playing fields so that the opposition Movement for Democratic Change can function free of violence - is today limited by his personal post-presidential options, even if it is encouraged by the MDC's chronic infighting.

If the perverse economic incentives on offer to his followers were removed, Mugabe could fall from power quickly. He might also find himself before the International Criminal Court, facing charges not only for his recent actions in Zimbabwe but also for those in Matabeleland in the early 1980s, which caused the deaths of more than 20,000 people. At 83 years of age, Mugabe has less to look forward to than he has to fear from his past.

Mugabe's current actions may appear inexplicable to those who operate according to principles of common good and fair play. In the circumstances, they are entirely rational - and venal.

Political patronage has opened up opportunities for instant wealth for a small number of Zimbabweans. Yet even this feeding trough is shrinking given the destruction of the farming sector, once the foremost foreign exchange earner. Arbitrage opportunities will also disappear as faith in the depreciating local currency lead to dollarisation.

This economic fact of life, not the pleas of foreign diplomats, will inevitably change things in Zimbabwe. While impossible to avoid, this conclusion will take still more time so long as the economy is still earning enough foreign exchange through remittances as well as mineral and some tobacco exports.

Thereafter recovery will be painfully slow, contrary to international and opposition hopes and aspirations. British Prime Minister Tony Blair has said the international community must fund the rebuilding of a "shattered" Zimbabwe.

Yet the history of aid bringing succor, development and recovery to Africa is poor to the point of pathetic. The worst sanctions currently aimed at Zimbabwe are not the ones leveled by America and Europe against Mugabe and his leadership or the voluntary cutbacks on donor assistance. The economic censure most difficult to change is that imposed by free markets and investors. Such sentiment takes generations to shape positively.

When Zimbabwe's economy reaches the bottom and Mugabe is finally ejected, the painful process of economic recovery will take at least as long as the decline, now more than a decade.

Greg Mills heads the Brenthurst Foundation, dedicated to strengthening African economic performance.

Please credit www.kubatana.net if you make use of material from this website. This work is licensed under a Creative Commons License unless stated otherwise.

TOP