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No hope of recovery under Mugabe regime
Isaya Sithole
July 14, 2005

http://www.fingaz.co.zw/fingaz/2005/July/July14/8979.shtml

IN the first part of this series last week I pointed out that the Zimbabwean crisis is now assuming proportions outside the capacity of the current regime to deal with, contrary to all the claims and pretensions of the government.

This week I discuss how Zimbabwe's economic recession has now transformed from a cyclical to a structural crisis.

The noble efforts of the central bank in trying to resuscitate the economy are now taking a negative turn as the regime begins to crumble under the weight of its irreconcilable complexities and absurdities.

The treasury is now as bankrupt as the political system and the manifestations are there for everyone to see.

The ordinary Zimbabwean on the street who is wearing the shoe is the one who knows best where it hurts. If the poverty and hardships faced by ordinary Zimbabweans were shared between them and their leaders, it would not generate so much tension.

The crux of the matter is that we are witnessing poverty for the masses amid plenty for the forgetful political class. Indications are that, sooner or later, those who possess and are selfish will not have their dinner in peace.

Unmistakably, it is the totality of the Zimbabwean crisis which now generates within the structures of President Robert Mugabe's ZANU PF party the pressures for what is called "political reform". While for the opposition, the broader civil society and the international community a long-term solution lies in "regime change", for ZANU PF "reform" has become the magic word for ending the crisis.

But the party hopes against hope that economic, as opposed to political, reforms spearheaded by Reserve Bank governor Gideon Gono will do the trick. Being a party with a Marxist-Leninist orientation, ZANU PF knows well that "economics is the base, and politics is the concentrated expression of economics".

The idea and hope seems to be that if a miracle happens and the economy fully recovers, all opposition to the system will fizzle out and the main opposition Movement for Democratic Change party will be rendered irrelevant.

The ruling party and government seem determined to continue to believe and argue that the economic crisis in Zimbabwe is not political and that it can be solved on a purely economic front without any far-reaching political concessions.

There is nothing that can be further from the truth. The reality is that the central bank is being given an insurmountable task.

The dramatic irony of the situation is that the costs of managing the superstructure of the status quo and implementing and sustaining a turnaround programme are beginning to exceed the surpluses generated by the system. As such, there is no hope for an economic recovery under the current regime.

"Reform", which ZANU PF believes in, by definition consists of an adjustment of the variables within a given institutional structure or simply "reform" through changes within the system. It presupposes an acceptance of the fundamental framework within which the system operates.

In the case of Zimbabwe, this would amount to no more than rearranging the furniture of ZANU PF and opening windows to make the system appear more democratic and accommodating, without altering it in any fundamental way.

This, quite clearly, is not what the majority of the people of Zimbabwe can and will accept. With the current economic rot and the government's callous insensitivity, if not inhumanity, a prairie fire has been ignited and there now exists in Zimbabwe's body politic more inflammable material than is within the capacity of the fire-fighting Harare regime to extinguish.

There doesn't seem to be anyone who sees the way out for ZANU PF and the economy. We are just stumbling blindly and falling.

Zimbabwe has been in a deep economic crisis since 1997 and to date we are still experiencing lethal problems characterised by a negative growth rate, scarcity of foreign currency on the official market, an intermittent and cyclical hyperinflationary rate, a biting shortage of fuel and basic commodities, high unemployment, depressed demand due to low salaries which mean less disposable income, low investment levels preceded by massive capital flight from the country.

Currently we have an unprecedented fuel crisis which has literally grounded industry and commerce to a halt, in addition to worsening an already critical urban transport situation. There is currently no sound proposal from the government on how to ensure the availability of fuel.

What makes the situation even more tenuous is the proposed hike of electricity tariffs by between 200 and 600 percent with effect from this month. The Zimbabwe Electricity Supply Authority has already started load-shedding on an increased scale. A combination of the fuel and energy crises will paralyse and cripple all economic activity.

Worse still, there are irreconcilable fundamentals between the government's progressive monetary policy and its retrogressive fiscal policy, as the two are not properly synchronized. The government has no fiscal discipline and the fiscal policy is under threat from high debt levels as the government's domestic debt is now over $10 trillion while the external debt is around $4 trillion. Total debt is above $14 trillion which is much more than the country's gross domestic product (GDP). The government is aware of both the crisis and its magnitude and has tried this and that but the truth is that they have long exhausted their capacity to deal with the challenges facing the nation. All the government's "economic recovery plans" have hit a brick wall but there was unprecedented hope and faith in the Central Bank's monetary policy, which hope and faith are now wearing thin following the new levels the crisis is now assuming. In the past we have had several worthy and unworthy economic plans which became much ado about nothing. These range from Growth with Equity and Zimcord in 1981 through the first Five Year National Development Plan in 1986, the Economic Structural Adjustment Programme in 1991, Zimprest in 1996, Vision 2020, the Zimbabwe Millennium Economic Recovery Programme in 2000 and most recently the Reserve Bank of Zimbabwe's efforts to restart the economy.

It is clear now that notwithstanding the missionary zeal and adventures of its Governor, the Reserve Bank seems to be fighting a losing battle due to massive governmental interference for short-term political expediency, and even outright sabotage by influential politicians and businessmen within the system. But whatever the case, Gideon Gono will go down in history as having put up a good fight. He is one of a few operating within the system who still has a conscience and better economic sense. There are now in Zimbabwe a whole lot of factors putting a much higher price-tag on the sustenance of the political status quo and the structures of a mismanaged economy. The regime and capital have over the past few years generally responded in diverse ways to the emerging costs and difficulties. For capital, both domestic and international, Zimbabwe has become a high-risk and high-cost investment site. It may well be said that capital is in a dilemma. Any move towards higher capital investment is an act of confidence - that markets will expand and that profits sizeable enough to repay the capital within a reasonable time-scale can be generated.

That confidence has been put into serious doubt since the onset of the recession in 1997 and may indeed have collapsed. The profit rate has slumped while a hyperinflationary rate has eroded the real value of assets. And the collapse of the Zimbabwe dollar and shortage of foreign currency suggests a breakdown of confidence on a substantial scale with large amounts of capital leaving the country.

The refusal of the World Bank, the IMF, major international donors, foreign banks and other financial institutions to extend credit or grant new loans to Zimbabwe is now beginning to be traumatic; it implies a dwindling of the sources of funding to meet the rising costs of ZANU PF authoritarianism.

With the economy in a deep slump, it has now become clear that overpowering economic and political forces have now combined to produce a comprehensive structural crisis for the Zimbabwean economy, generating schisms of varying significance within capital, the regime and some sections of the Zimbabwean populace. The responses of the regime to the crisis, especially since 2000, have been manifold. The state's involvement and intervention in the national economy was sharply accelerated. The instruments of coercion and repression have been perfected and considerably enlarged. The bureaucracy required to manage and administer the ever-increasing body of legislative and ministerial controls and restrictions on business and the hungry and restless masses has been similarly increased. A specific militarist social formation aimed at securing military self-sufficiency, intimidating dissenting voices, stifling free political debate and crushing resistance has been set in train, with the police, armed and security forces occupying an increasingly political role in directing and implementing the state's policies. Not to mention a bloated and inefficient civil service coupled with thriftless non-productive expenditure by government. In these essentials, the massive growth of the ZANU PF state machine requires funding far beyond the surplus the regime can generate.

These difficulties have now reached the point of unprecedented crisis- the gravest yet in the history of the state. The fundamental factor contributing to the transformation of the recession into a structural crisis concerns the ever-growing absorption of the country's resources by the state machinery. These resources have to come from somewhere but they can not come from further taxation of the labour force as that has been pushed to its limits. Nor can they come from some miraculous increase in productivity since such an outcome is dependant upon the wholesale dismantling of the structures of the ZANU PF regime. Recent developments suggest that resources available from international borrowing have now dried up and are unlikely to be resumed for years to come. Public pressure against bank loans to Zimbabwe has become a major political force in the United States, Britain and several countries of Western Europe. Hence, the needed resources can now only come from corporate profits, which are not much, if there are any.

It is in this context that for the first time, business, both local and international, is forced into an agonizing reassessment of the value of their interests in Zimbabwe, and into making a choice as to whether they should continue the risk of remaining committed to the establishment. The regime knows that its policies are not economically sound and have resulted in massive capital flight from Zimbabwe. Capital, on the other hand, is equally aware that keeping the lid on a potential revolt by the majority of the population through mounting repression and state acts not only puts in question that security, but undermines the capital accumulation process itself. The system, realizing the anger and impatience of the people with its failures, has set in motion a systematic process of patronizing part of the electorate through clandestinely dishing out unbudgeted for funds to them and thus giving them a stake in maintaining the status quo. Talk of the war veterans, war collaborators and former detainees. Now the system is pursuing an appeasement policy code-named "Operation Garikai" to appease "tsunami victims" in the aftermath of the discredited "Operation Restore Order".

Again the Reserve Bank of Zimbabwe was arm-twisted to release a yet unbudgeted for and staggering $3 trillion to build houses for the displaced and homeless. Many of the youth militia from the National Youth Service who are used to prop up the regime are now involved in managing the institutions of the system- in the police, security and armed forces, in the various departments of state, in executive and managerial positions of the economic infrastructure, and in other forms of non-productive employment. This parasitic profile of employment has considerably raised the cost of maintaining an authoritarian regime. As opposition to the regime mounts, this sector of crony employment can only become more expensive and extensive. Capital will ultimately have to bear these costs without any certainty of social and political stability or a resumption of high rates of return on investment. How far will capital go in abandoning the Mugabe regime?

This is certainly the central problem confronting the regime but much depends on what the regime itself will do in the near future. They have to choose either to be responsible and thus dig themselves honorable graves or to be irresponsible and dig themselves dishonorable graves. I hope that they will choose the former for, as a result of my personal interaction with some of the influential pillars of the system; I know that they want to leave behind a good legacy although they still need to do a lot in shedding their characteristic "our-hands-are-tied" syndrome. Let's continue the discussion next week.

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