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ZIMBABWE: Opportunistic money is creating a new elite
IRIN News
July 06, 2006

http://www.irinnews.org/report.asp?ReportID=54449

HARARE - Zimbabwe may have the fastest shrinking economy in the world, but a small, well-connected elite appears immune to the hardships.

Brian Murara, a salesman at a car dealership that imports and sells luxury vehicles, is doing well. "Although most of the vehicles that we sell are bought by companies, a significantly large number of our customers are individuals who walk into our showroom and buy any one of the latest all-terrain and sports vehicles."

A former MP for the ruling ZANU-PF party, Philip Chiyangwa, last month purchased a twin-turbo Mercedes Benz S600 - supposedly the first of its kind in Africa - for a jaw-dropping US$130,000. Defending shelling out so much, he said: "I have to celebrate my success in business, and one of the ways of doing that is to buy the latest models of cars. The kind of business that I am in demands that I should dress in a certain style and drive a certain car."

An average salary in Zimbabawe is Zim$20 million (US$200), and last week the monthly cost of a basic food basket for a family of six jumped to Zim$60 million (US$600). A critical lack of foreign exchange means shortages of imported items, including medicines, schoolbooks, agricultural inputs and spare parts.

Chiyangwa, a nephew of President Robert Mugabe, rose from being a boxing and music promoter to head the black business empowerment Affirmative Action Group before winning a seat in parliament. He was detained last year on treason charges, after a string of arrests when a South African spy network was allegedly uncovered. Now he makes his money in real estate.

A property consultant in the capital, Harare, told IRIN the upper end of the real estate market was booming. "Our expensive houses are generally in the [Zim]$15 billion [US$150,000] category, which is where we are getting most of our business," said Vimbai Sithole. "In a good month we can get as many as five clients buying super-luxury houses worth more than [Zim]$50 billion [US$500,000]."

The northern suburbs of Borrowdale Brook, Mandara and Glen Lorne are where the new mansions are being built. Despite the rocketing price of construction materials, the estates keep expanding.

Luke Tembo, manager of a clothing store in Harare, is angered by such displays of obvious wealth. "My salary is not enough to see me through the month - I have to supplement my income by selling sandwiches to colleagues. It offends me to see other people apparently enjoying a better life than myself."

Eight years of economic decline in Zimbabwe have cut gross domestic product by 40 percent and halved income per head. Factory output has fallen by 45.6 percent since 1998, and manufacturing levels are at their lowest since 1971. How, then, do the super-rich make their money?

According to economist James Jowa, government policies that have allowed the parallel market to thrive, combined with corruption, have led to the skewed distribution of wealth. This means that every evening long lines of people walk home from work in the city centre because they cannot afford bus fares, while a fortunate few cruise past them in expensive cars.

"In a situation such as ours, a small class of people will manage to access certain goods and then sell them at a very high profit," information and anti-corruption minister Paul Mangwana told IRIN. "But this does not mean that every rich person you see is a crook."

Jowa agreed, adding there are "people in the financial services sector, managing directors of the few remaining manufacturing companies and traditional business people who have made money legitimately". However, the temptation and opportunities are there to bend the law.

Zimbabwe's economy slipped into crisis after the International Monetary Fund froze aid in protest over the government's spending priorities. Unable to contain inflation, the government resorted to price controls on basic commodities, which resulted in their diversion to the parallel market and further shortages for people who could not afford the high prices.

Currently US$1 is worth Zim$500,000 on the parallel market compared to the government's rate of Zim$100,000 - a lucrative business for those who can get their hands on the dollar at the official price.

The Governor of the Reserve Bank of Zimbabwe, Gideon Gono, recently acknowledged the extent of corruption. He noted one simple scam run by some new commercial farmers and transport operators, who receive heavily subsidised fuel from the government, was to sell it on the street.

Supposedly feeding the nation, commercial farmers are allowed to buy diesel at the equivalent of 11 US cents per litre; public transport operators get their fuel at 23 US cents per litre; on the parallel market the young men who stand around intersections with jerry cans and funnels sell it for 50 US cents a litre.

The government's controversial land redistribution programme has also proved a ready source of easy money. Politicians, army generals and parastatal executives with little or no farming experience constitute the majority of people who have received large-scale commercial farms, according to Jowa.

Mangwana defended the business interests of political leaders, so long as they stuck within the law. "Leaders have to lead by example by creating wealth. If they don't generate wealth, who will employ the people?"

But, alleged Jowa, "It is common knowledge that only the well-connected in politics and business were awarded prime commercial farms. It is also common knowledge that the beneficiaries would move onto the farms and [without investing]harvest and sell the products they found growing on the farms, making them instant multi-billionaires."

Three government ministers were recently ordered by Vice President Joyce Mujuru to return agricultural equipment they allegedly seized from a formerly lucrative horticultural estate in the eastern part of the country. The list included tractors, trucks, a combine harvester and irrigation equipment. The estate, Kondozi Farm, used to earn the country millions in foreign exchange.

A further exploitable loophole in the land-reform programme is that all new commercial farmers are entitled to loans at 20 percent interest, while the market rate is 700 percent. Some have been accused of using bank financing for non-farming purposes. Last year the official Herald newspaper quoted Mujuru as warning that "all beneficiaries of land reform found under-utilising their farms are saboteurs who should lose those properties".

According to Neil Wright, chief economist of the Commercial Farmers Union, commercial agricultural production has fallen by between 60 and 70 percent since the land redistribution exercise began in 2000. The beef sector has been the hardest hit, with the commercial herd reduced from 1.2 million cattle per year to just 150,000, and milk production dropping from 180 million litres to 95 million.

The government has deployed soldiers to monitor the operations of the newly resettled small-scale farmers to ensure that they use the land effectively. Under this scheme, army personnel oversee the production and sale of maize, but the campaign has reportedly been less successful than was hoped.

Robert Mpofu, a subsistence farmer in Seke, just outside Harare, has won awards for his farming skill, and feels that he should have been a beneficiary of land reform.

"I applied for a farm, which I was awarded by the government, but when I had just settled in, a senior government official ordered me off the farm," he told IRIN. He has since returned to his communal area.

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