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Interview: Tony Hawkins, Economist, University of Zimbabwe
Moneyweb
July 25, 2007

http://www.moneyweb.co.za/mw/view/mw/en/page55?oid=149568&sn=Detail

Moneyweb: Tony Hawkins is a professor at the University of Zimbabwe. He's also the man who writes for the Financial Times of London on what's going on in that country. We've spoken with Tony in the past, It's a real pleasure to welcome him back to the programme this evening. Tony, what keeps you in Zim?

Tony Hawkins: Well, I have a job here, I suppose, and, you know, we live in exciting times, and it's a case study of economic decline or decay or collapse, or whatever word you want to use.

Moneyweb: In your report in the Financial Times today, you said - and there's been quite a lot of rumours recently - that there's going to be a new Zimbabwean law forcing companies to sell 51% of the shareholding to black Zimbabweans. It's got a name: Indigenisation and Economic Empowerment Bill. Here in South Africa people were thinking this was just rumours and talk - but it now appears that it is a fact?

Tony Hawkins: You know, we haven't actually seen the draft bill; we're not sure whether the actual bill that will be debated is going to be the same. It's pretty loose, got a lot of holes in it, and there's obviously lots of scope for individual deals, which of course is the way things work in Zimbabwe and the way people like Implats have played it up here.

Moneyweb: That's a question, Tony. We have spoken on this programme recently with David Brown, the chief executive of Impala Platinum, and he seemed relatively unconcerned. Should he be more worried?

Tony Hawkins: Well, you know, Implats have used the approach of negotiating with the government, and they obviously think they have got an arrangement. They did cede some property to the government last year, and I would assume that they therefore are quite confident of the situation. The thing that Implats may have got wrong is twofold. One, they pinned their future on Zimbabwe for expansion, and secondly, you know, they seem to have forgotten the old thing known in the trade as "obsolescent bargain". Once you put your money on the table, the power shifts from the investor to the government. And we're going through a phase worldwide, as you know, of resource nationalism - you know, from Venezuela, Russia, and other countries in terms of oil and gas and so on. And Zimbabwe, particularly under the present leadership, is likely to become increasingly militant along these lines, rather than the other way round.

Moneyweb: So Impala shareholders should perhaps be taking this into account when they're paying the prices that they are for the stock today?

Tony Hawkins: I wouldn't like to comment on that part, because I don't know much about that.

Moneyweb: But it is an issue. It is a definite risk that perhaps has been downgraded somewhat?

Tony Hawkins: Yes.

Moneyweb: What about PPC? It owns a big porthole factory, cement factory, in Zimbabwe. Talking with the chief executive, John Gomersall, of that company, he said yes, they are complying with the law, they are supplying into the market at below their cost price. Are you seeing a lot of cement being snapped up now, at, well, what clearly is lower than cost price for the producer?

Tony Hawkins: I'm sure you are, but it's very difficult to come by. I think there was a story that PPC in fact had cut back production because of a problem at their Colleen Bawn plant, a technical problem, nothing to do with the pricing. But, you know, there are certainly stories of rampant racketeering going on in, particularly, the cement field - in other words, people buying it up at the cheap price and then storing it somewhere and selling it at ten times the cheap price.

Moneyweb: Tony, also yesterday, according to your report in the FT, Robert Mugabe thanked African and non-aligned countries for continuing to support him. I guess that puts the South African policy of quiet diplomacy into some perspective.

Tony Hawkins: Well, yes. I mean, I think the South Africans are in a difficult position on this one. They are committed, they agreed at the SADC meeting in Dar es Salaam in March, that President Mbeki would be the mediator. The Zimbabweans have snubbed him a couple of times and President Mugabe has said, look, I'm not interested in the new constitution. Yet the sort of red line or bottom line for the other side is a new constitution. So it does seem to me there's an unbridgeable gap there. And, you know, the action now moves to the next SADC meeting, which is next month in Zambia, where the SADC leaders will have to decide either to turn up the pressure on President Mugabe or accept that the mediation plan is going to flop.

Moneyweb: We have reports that 6 000 people are coming across the border from Zimbabwe into South Africa legally, and a few thousand more illegally. Is this consistent with what you're seeing on the ground?

Tony Hawkins: Yes, it is. I'm surprised at the number coming across legally. I must say, that does surprise me. But the illegal number has been, sort of, floated around a lot. I don't think anyone really knows how big the number is; no-one really knows how many Zimbabweans there are illegally in South Africa. We get this figure of three million being touted around. But if you talk to anyone in business here, they will tell you - particularly in the mining sector, construction, engineering - that they're losing staff, skilled staff hand over fist to South Africa. Partly I suppose to do with 2010 and so on. So those would be legal entrants.

Moneyweb: Economic refugees?

Tony Hawkins: Certainly the ones who are crossing illegally. The legal ones, I think, are moving over because there are jobs there, because the money's better and because there's a career path there whereas, in Zimbabwe at the moment, it's not easy to be confident on any of those points.

Moneyweb: How are people making do? We hear there's no bread in the stores, very few other kinds of provisions?

Tony Hawkins: Well, bread is more [connection temporarily lost] ...

Moneyweb: Mm, what a pity. What a pity. Maybe that was a censor, who was about to... Well, we will try, Gaylyn will try to get Tony back. Unfortunately losing Tony Hawkins at a point there, but very interesting to get it from a dispassionate observer, David?

David Shapiro: Ja. And he tells it like it is, and doesn't say much for South Africa. If Mugabe makes statements that he continues to receive support, and everybody else is silent or doesn't say we're not supporting him, it's tacit support. And, you know, that's what the rest of the world are up in arms about - that Africa's heart seems to be with Mugabe. Maybe their head's not, but certainly their heart is.

Moneyweb: I think we've got Tony back with us. Tony, you with us?

Tony Hawkins: Yes, I can hear you.

Moneyweb: The question was how people are making do with, apparently, not much bread and other provisions in the stores.

Tony Hawkins: Well, as I was saying, bread is available if you happen to be there at the right time, but you do see long bread queues. Meat is virtually out, just at the moment. Pet fuel is very short, things like sugar are on and off, and so on. I think the real crunch will come in a few weeks when firms have to decide to restock or, as you were mentioning with PPC Cement, have to decide whether they're going to operate at a loss and, if so, for how long. And I think that's when the crunch will come and that's when we will see what the government strategy will be, because it's very difficult to see that they can insist that, say, people in the fuel industry should lose 50% on every litre of petrol they sell, and so on. It just doesn't make sense.

Moneyweb: We know it is hyperinflation, but any kind of numbers are being thrown around. What do you believe that the inflation rate is in Zimbabwe right now?

Tony Hawkins: Well, the official inflation rate was last 4 700% or so in May, and most people reckon it probably got to around 6 000% in June. But there are any number of unofficial estimates saying it could be as high as
12 000% or more. Of course, by suppressing the numbers, which is what the government have done, we now have a situation where any sort of rumour gets around. People just make up a number and say, well, that's the story. And so I've heard a number of 22 000 and so on, but I think that's way above the top.

Moneyweb: Tony, you still live there, you still have to eat every day - how are you getting your provisions?

Tony Hawkins: With difficulty. But it's still possible to get quite a lot of things in the shops. As I say, meat is difficult, but just about everything else one is able to get at the moment.

Moneyweb: And your salary from the university? Is that being adjusted by inflation as well?

TTony Hawkins: Well, that's not worth very much.

Moneyweb: I guess salaried employees then in Zimbabwe will be the people who are taking most of the pain?

Tony Hawkins: Exactly. But that of course is why the government went through this policy of halving prices, which of course has made them pretty popular with a lot of people, because there has certainly been a big reduction in prices in the retail shops. And therefore a lot of people are quite happy about it. I think anyone who looks beyond the next week or two and says, well, are companies going to restock and, if so, how are they going to restock, and so on - I think that's when the government will have to move to some kind of what they call "pricing model", where they're going to agree price mark-ups and price margins with manufacturers.

Moneyweb: Our James Myburgh wrote a piece on Moneyweb last week, taking Aristotle's textbook on tyrants, and used Robert Mugabe as an example of it. And it's quite uncanny in that virtually all that Aristotle said a couple of thousand years ago is being practised, or appears to be practised, by Robert Mugabe in Zimbabwe. Is there any way that one can make logic, perhaps different logic, about what's happening there right now?

Tony Hawkins: Well, what one is seeing is a government that is trying to hold on to power in increasingly difficult conditions. It managed, it has won, or rigged, depending which way you look at it, elections, very satisfactorily from its viewpoint, in recent years, and it can see itself winning elections again, I would guess, next year. The opposition is divided and weak and unfinanced, and doesn't have a fair chance anyway because the electoral playing field is anything but level. So in that sense you can see the government is confident that it's doing well. There are people near the top of government, there is a ruling elite that is doing very well financially out of this lot. And it is, I suppose, typical of this kind of state, of a quasi-paled state, a predator state where, provided the minority at the top are happy, provided you keep the security forces happy and so on, this situation could drift on for some time.

Moneyweb: Does that mean years?

Tony Hawkins: I would have doubted it, but who knows? I've given up trying to estimate how long these things last. It's not a thing you should ask an economist, to be fair, because it is all about politics, and it'll be politics that will change this, one way or the other, eventually. But who knows when eventually will be?

Moneyweb: Tony Hawkins, professor of economics at the University of Zimbabwe. And you can read his incredibly accurate and, as you hear, dispassionate analysis of the Zimbabwean situation from Harare. He writes for the Financial Times of London which, as you should know by now, you can get on your doorstep at six o'clock in the morning if you live in one of the urban areas here in South Africa.

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