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An economic noose tightens in Zimbabwe
Robyn Dixon, Los Angeles Times
August 20, 2007

http://www.latimes.com/news/nationworld/world/la-fg-zimbabwe20aug20,1,1736431.story?coll=la-headlines-world&ctrack=1&cset=true

Bulawayo, Zimbabwe -- He has lost his export customers, struggled with power cuts and shortages of foreign currency and raw materials. He has raised prices several times a month to keep up with hyperinflation. He has shrugged off government inspectors angling for bribes.

Through it all, clothing manufacturer Anthony Robinson has always managed to turn a profit.

Until now.

The new enemies of President Robert Mugabe's regime inhabit one of the country's last productive sectors -- manufacturing and retail. In an Orwellian twist to Zimbabwe's downward spiral, more than 7,000 of them have been arrested and jailed in recent weeks, accused of breaching draconian new price controls.

Among them are many senior black managers of national retail chains. Robinson, a 60-year-old white Zimbabwean, fears he could be next.

"Everyone is terrified," he said. "To be honest, you don't have to contravene anything. If they want to put you in jail, they'll put you in jail."

Even if he doesn't end up behind bars, Robinson says, he'll probably be out of business in a couple of months.

"You've got to be bloody hopeful or stupid to remain here," he says. Yet that's what he intends to do.

Eventually, economic analysts say, Mugabe's system has to collapse. But no one knows when that will be.

A drive across Zimbabwe today reveals a desolate portrait of decline: Aimless mobs of people wait along the rural roads, each with a silent pleading gesture for a lift at every passing vehicle. With fuel almost dried up, unemployment at 80% and transport too expensive for most, movement is almost frozen.

Along the highways, brown grass stands high between the thorny acacias in a stunning vista of what Africa must have looked like before mechanized agriculture made farming Zimbabwe's main export business. Now, most farms lie dormant.

Meat disappeared after the government shut down private abattoirs, transferring all slaughtering to a quasi-governmental organization that cannot meet demand. Fuel supplies dried up after the National Oil Co. of Zimbabwe was made the sole authorized distributor.

In towns, straggling queues form at any rumor of sugar, maize or bread. Most supermarket shelves are empty of basic staples: no meat, no sugar, no maize, no bread, no pasta, no rice, no milk.

Authorities have focused on one sector after another, accusing them of collaborating with the opposition, supporting regime change or engaging in economic sabotage.

Beginning in 1999, most white-owned and some black-owned commercial farms were seized, leading to a collapse in production, food shortages and hunger. More than 3 million people now need food aid.

In 2005 at least 700,000 people were left homeless by Operation Murambatsvina, or "clean out the filth," which destroyed the shacks and livelihoods of informal traders.

According to the government's figures, inflation has rocketed to 4,500%. Independent economists estimate it is closer to 7,000%.

The country's leaders are now focusing on what's left of the business community, accusing it of stoking hyperinflation to undermine the ruling ZANU-PF party.

The government last month forced businesses to cut their prices in half, leaving them to face catastrophic losses. Businesses risk a government takeover if they close.

Manufacturing and retail account for about 27% of what is left of the formal workforce.

"We are operating at a complete loss," said Robinson, a shrewd-eyed, wiry man with the rugged tan of a white man born in Africa. He is one of the few businessmen willing to risk government ire and speak out publicly. "Basically we haven't got long to be in business. I'd say we won't see October if this madness doesn't stop."

Factories struggle along, running a few days a week, as owners try to slow production to a minimum without attracting the government's wrath. Some are just treading water; others lose money every day they open.

Robinson has been in business for 36 years. When he was exporting to Europe in the 1990s, he employed 172 people full time. Now 143 people work for him three days a week. He produces only about 110 blazers and pairs of trousers a day, compared with 300 only a few months ago.

His price structure illustrates the effects of both hyperinflation and the government's plan to control it.

For every blazer he makes, Robinson's company, United Clothing and Shirt Manufacturers, loses 1.3 million Zimbabwe dollars, or $5,300, according to the highly distorted official exchange rate. Each pair of trousers loses him
600,000 Zimbabwe dollars, or $2,450.

At the more realistic black market rate, he still loses $7.20 and $3.33, respectively.

Two weeks after the price controls were imposed July 2, the government also required him to give his employees a 162% raise.

Robinson isn't the only one losing money. The maximum price that retailers may charge is slightly less than the wholesale cost.

The prices are enforced by roving squads of army and police. Last month the squads hit stores and slashed prices. Large groups of people followed, stripping the shops of stock at the new price and leaving owners unable to restock.

"When these guys come in, they're followed by, I dare say, 'friends.' To me, they've tried to legalize looting," Robinson said.

Despite the criticisms and opposition within the ruling party, Mugabe, 83, said early this month that price controls would stay.

Several black businessmen who were arrested, jailed and released pending trial, declined to speak to The Times, saying they were afraid of repercussions.

But a black senior manager at one national retail chain, who spent the night in a cell after being accused of breaching the price controls, spoke on condition of anonymity, even though he is terrified of being jailed again.

"Please be careful. I could get into real trouble," he pleaded.

"I don't know where we are going. I don't think . . . any business will survive under this," he said, speaking rapidly during an interview in his office.

He said that after his arrest last month, he was taken to a squalid, freezing jail cell -- it is the dead of winter in the Southern Hemisphere -- in one of the poor suburbs of the capital, Harare.

"It was so cold all I could do was pray to brave the cold, and thank God I did that," he said. Employees of his are being arrested almost every day, he added.

"You are working in an evil system," he said. "And unfortunately, the people who are involved in it will never see that, because for them it works and they enjoy it. Once you join them, you become as evil.

"I don't think they care about human life, at the end of the day."

Another black retail manager speaking on condition he not be named said that even after his company complied with price controls, the police and army weren't satisfied.

"You have five or six large people, and all of them are asking different questions at the same time. They would talk about how 'we locked so-and-so up and we can lock you up,' " he said.

The South African economic analysis group Econometrix predicted in a report last month that Mugabe would find it difficult to survive. Hyperinflation is likely to squeeze his supporters in the security forces and fuel discontent, it said.

Independent Harare-based economist John Robertson warned of protests and food riots as the supply of essential goods dries up and businesses try to stay afloat.

"Inevitably we will face many more shortages," he said. "Some companies will go out of business before too long.

"It won't be sustainable for very long. I think there's a very serious danger there will be an upwelling of severe anger that could lead to social unrest and demonstrations in the street."

He said that blaming business for hyperinflation and profiteering seemed designed to deflect popular anger from the government and onto shops and businesses.

But ultimately, he said, Mugabe's belief that the government could legislate economic behavior was doomed.

"The laws of economics are very powerful in the end, and they will take over," Robertson said. "It's actually quite a dangerous business trying to force bad policies into a system where there's a great reluctance to accept these policies."

He said the retail shortages would slash tax revenue, further complicating the problems.

But Mugabe is pushing ahead. Despite reports of strong opposition from pro-business ministers, his government recently introduced a bill in the parliament that would allow it to hand 51% of foreign- or white-owned businesses to black Zimbabweans.

Some fear that such a law would allow the transfer of businesses to ZANU-PF heavyweights and allies, as happened after the farm invasions.

"I believe it's another one of these grab-the-farm strategies, but now it's grab-the-business, and there will be the same dire consequences that there were before," Robinson said.

He said he no longer bothers to exhort his staff to work hard.

"Now I let them work at their own slow pace and encourage them to take longer tea times."

After clinging to his dream for all those years, he sees it ebbing away like water through his fingers.

"Maybe it's a softening-up process. You won't feel too bad losing 51% of your business, because you don't have a business anymore."

robyn.dixon@latimes.com

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