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How life goes on for the super rich of Zimbabwe
Dianna Games, Business Day (SA)
May 21, 2007

http://allafrica.com/stories/200705210242.html

A Zimbabwean who recently visited Harare for the first time in more than nine years remarked that the biggest change in the capital over a decade had been the increased evidence of wealth. He mentioned the large four wheel drive vehicles that ply the roads, huge mansions in the upmarket suburbs and supermarkets stocked to the brim with imported goods. In the 1990s, when the economy was in better shape, none of this was a feature of the landscape, so why now, he asked, when the economy is at an all-time low? It does not square with regular newspaper reports about soaring inflation, declining incomes, massive unemployment, food shortages and other negative indicators. To find the answer, I spoke to a number of Zimbabweans about what they believe is driving this new wealth.

Inflation and black market trading, I was told. Remittances are also a key factor in keeping the economy afloat. A large chunk of Zimbabwe's wealth is outside the country, taken by departing Zimbabweans and stashed abroad in hard currency by newly rich businessmen living inside the country. Zimbabweans in the diaspora are a key source of foreign exchange, the trading of which has become the most lucrative game in town. The parallel rate for hard currency last week rose to Z$40000 to one US dollar, fuelled mostly by shocking new inflation figures putting annual inflation at 3700%. The official rate remains at Z$250 to the US currency. Black market currency trading has become particularly lucrative for government officials, who can access the official rate to change money and sell it into the black market at a massive profit.

They, along with farmers and other special categories, can also buy fuel at subsidised prices and sell it back into the economy at market prices. Quick fortunes have been made by fuel traders since the government deregulated the market and sellers can virtually set their own prices. People are also making good money - in Zimbabwe dollar terms - on the stock market, the preferred place to store money and get a decent return at rates ahead of inflation. A handful of companies, particularly exporters, are making good profits but company results are often treated with scepticism as hyperinflation has allowed creative accounting. The figures can be tweaked to produce almost any result. Treasury bills are a popular way for companies to make money. With much of Zimbabwe's manufacturing running at 20% of capacity, there is just no good reason to plough profits back into the business.

But wealth creation is "slowing down", some people say. Supermarkets report a decline in sales of expensive luxury goods as even wealthy customers are forced to use their money to keep the wheels of daily life turning. Money increasingly has to be diverted from buying 10-year-old whisky, imported shoes and expensive cars to paying rapidly rising school fees and keeping up with massive increases in prices for municipal services and foodstuffs. Much of the wealth on show (which is effectively limited to a handful of the population - it just seems to be more because it is openly flaunted) is also a product of the heady days of a few years ago, when spiralling inflation drove massive spending. At today's dizzying inflation rates, almost everyone is poorer. And inflation is not going to slow down anytime soon. The government's printing presses are working overtime to prop up its "quasi-fiscal" spending on supporting exports, reviving agriculture, keeping parastatals going, giving public servants wage increases and so on.

With an election next year, spending on populist and unproductive priorities can only get worse. Economists are predicting six-figure real inflation by then. Already the government is setting up an Incomes and Pricing Commission which will have sole right to set charges for hundreds of price-controlled items, and establish profit margins. Violations will carry a jail sentence of up to five years. While the authorities claim that this is in the interests of the poor, in effect it will simply create more shortages of a variety of basic goods. Zimbabweans have seen this movie before. Some bakers have already ended up in jail for selling bread above the government price. With no end in sight to the distortions in the economy resulting from the political climate, many people will still make a lot more money but the issue is not about their unethical ways of creating wealth, it is something much more serious. The more the economy benefits these people, the less incentive they have for supporting change. That is far more dangerous than flaunting your wealth in the faces of an increasingly miserable population.

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