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Polls cause havoc in battered economy
Shakeman Mugari, The Zimbabwe Independent
March 20, 2008

View story on the Zimbabwe Independent website

Zimbabwe's ailing economy will crash further after the March 29 polls because of government's populist policies that are designed to win hearts ahead of the elections, analysts have said.

The Reserve Bank of Zimbabwe (RBZ) has been forced to print trillions of dollars to fund Zanu PF's campaign ahead of the synchronised elections. Although some of the policies might sound genuine in nature, their timing is curious. The central bank was last week forced to print trillions to fund civil servants' salaries which government was forced to review for fear of losing the elections. There were fears in government circles that the discontent among soldiers, police, teachers and other civil servants would translate into votes for the opposition.

There is also a direct link between the Zanu PF campaign and the farm mechanisation programme phase three launched by government and the central bank two weeks ago. These populist policies that are disguised as part of a national strategy or necessary interventions will have a severe impact on the economy after the elections. So serious is the impact of these policies that whichever political party or presidential candidate wins the elections will face a more depleted economy.

The winners will have to deal with an economy that has been pillaged for political expedience. Inflation, currently at 100 580,2%, will skyrocket and industry which is operating at 20% of capacity will continue to collapse because there is no foreign currency to import critical raw materials. The warning signs are already flashing. Last week domestic debt reached $1,4 quadrillion as government continued to fund its operations through borrowings. Inflation is likely to hit more than 200 000%, according to estimates from bank economists.

Analysts however say the real impact of the government's populist policies will be seen after the elections when the country starts counting the cost of the expanded mechanisation programme. "It is vote-buying but it will come back to haunt whoever wins the elections," said economic commentator Tony Hawkins. "The government is broke but whoever wins whether it's Tsvangirai, Makoni or Mugabe will have to face a worse situation. The February inflation figures are not yet out but I wouldn't be surprised if it comes to 300 000% because of government actions," said Hawkins. Hawkins said inflation is likely to reach 400 000% by May this year. "Right now they are damaging the economy further but I don't think they care because all they want is to win votes." He said whoever wins will have to immediately seek international assistance to revive the economy.

It is almost certain that very few of the thousands of people who gathered at Bak Storage for the launch two weeks ago knew that the future of some key sectors of the economy had to be sacrificed to make this day possible. While the people were celebrating toilet-paper rolling machines, generators and candle-making machines some established companies were tottering on the brink of collapse. The reason is that it is their foreign currency which had to be diverted to import the equipment. The companies cannot produce for their export markets and gold producers say their production is likely to slump to as little as three tonnes from last year's 6,7 tonnes. The real impact is that there will be very little foreign currency coming into Zimbabwe after the elections because the key earners have been destroyed. Their revival will need more foreign currency and time. Zimbabwe's biggest gold mine, Metallon, has not received its foreign currency from the central bank since December. Operations at the company's five mines that produce 51% of Zimbabwe's gold have ground to a halt. Some exporters have not received their foreign currency for the past four months. Applications from companies that require foreign currency to import raw materials for production have not been processed for the past three months.

A number of companies were this week considering closing until after the elections because they don't have raw materials. There is also uncertainty in the market after President Robert Mugabe signed the empowerment Act which will force foreign-owned companies to surrender 51% of their shareholding to locals. Perhaps the major problem with the recent mechanisation programme is that it has now changed from its initial focus. At its launch in 2006 the programme was targeted at new farmers. The idea was that the new farmers did not have enough capital to buy the necessary equipment like tractors, ploughs, planters and harrows. Events at Bak Storage two weeks ago told a different story. A look at the inventory indicates that the motive of the programme has been twisted to suit the Zanu PF campaign strategy. The programme was widened to include equipment which has nothing to do with farm mechanisation. The target was broadened to include cooperatives, small businesses, youths and women. Again the problem here is not the idea but the motive which explains the timing. In the spirit of Zanu PF's empowerment campaign the central bank will distribute 82 diaper, sanitary and maternity pad machines, and 82 toilet roll-making machines. The list includes machines for making cosmetics, popcorn, samoosas, drinking straws and envelopes.

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