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Winners
and losers in land of starving billionaires
Chris McGreal, Mail and Guardian (SA)
April 25, 2008
http://www.mg.co.za/articlePage.aspx?articleid=337794&area=/breaking_news/breaking_news__africa/
Each day, Edwin Makotore's
wife and children hit the streets to earn cash so he can pay for
the privilege of working.
The 38-year-old father-of-two
is the only one in the family with a full-time job, but by the time
he has met the soaring cost of travelling to work in a small Harare
supermarket, paid out of wages wildly out of step with the 165 000%
inflation rate, Makotore is out of pocket.
But with only one-in-five
adults in employment, a job is a far more precious commodity than
money in Zimbabwe, and Makotore is not going to let it go.
"My wife gives me
the money to go to work each day," he said. "We can't
afford to send the children to school so they go with her to the
streets. She sells some small things, fruit, things like that.
"One day things
will get better and then it will be good to have a job. Everyone
will want one. It's like an investment; I pay to keep my job because
I will make money out of it one day. Until then someone makes money
out of me."
For now, Makotore is
a loser in an economy which is shrinking faster than in any other
country. But there are some who are doing well out of hyperinflation.
The winners include those
whose mortgages were reduced to less than a single, near-worthless
banknote in a matter of months. Among the losers are the elderly,
the value of their pensions slashed to nothing.
But the real beneficiaries
can be found in Borrowdale Brooke. This upmarket suburb in the north
of Harare is a mass of construction sites and newly completed palatial
homes. Besides President Robert Mugabe's own palace, built by the
Chinese with a hint of the forbidden city about it, ruling Zanu-PF
apparatchiks and generals have set themselves up in homes that none
could afford on their official salaries.
Some have become extravagantly
rich by manipulating the vast gap between the official and black-market
exchange rates to plunder Zimbabwe's dwindling hard currency, and
buy brand new Mercedes Benz cars for $50 (R380) while the country's
manufacturing sector collapses for want of money to produce crucial
exports.
The new rich include
men such as the Zanu-PF member of Parliament and party powerbroker
Philip Chiyanga, who also happens to be one of Mugabe's cousins.
Chiyanga owns a sprawling 30-room mansion in Borrowdale Brooke with
three helicopter pads and has been seen driving a Hummer.
The mansions have grown
as Zimbabwe's economy has shrunk by about half over the past decade
of crisis. Export earnings have dropped from about $4,56-billion
(R35-billion) a year to around $1 487-million (R11,4-million).
The manufacturing sector
has halved in size and revenue from the tourist industry, once another
big earner, has fallen by 75% over the same period. Many visitors
now see Victoria Falls from the Zambian side and those who do cross
in to Zimbabwe do not stay as long as they used to.
Over the past week the
black-market exchange rate for the Zimbabwe dollar has plummeted
against sterling, from about Z$90m to the pound to Z$190m. The largest
bank note in the country is worth about 25p (50 US cents). No wonder
Zimbabweans call themselves starving billionaires.
The currency has been
driven down recently by Zimbabwe's central bank, which has been
turning to the black market in a desperate search for US dollars
to pay the bills, not least for electricity from Mozambique.
John Robertson, a highly
regarded Zimbabwean economist, said the government had also been
plundering hard currency accounts held by businesses to pay off
the huge costs of its election campaign, contributing to the spiral
of collapse.
"From January, with
the election campaign, the government started importing tractors
and cars and television sets and all manner of things to give away.
That had to be paid for and it was paid for from the foreign currency
accounts," he said.
Any business that exports
is obliged to hand over more than 35% of the hard currency it brings
back into the country to the government in exchange for Zimbabwe
dollars. The rest is held by the central bank and is theoretically
available to pay for imports necessary to the business.
But many are finding
that they have to wait for up to four months for the money, and
some do not receive it at all.
"It got worse and
worse," said Robertson. "Businesses have incurred debts
and they are not paying them. The suppliers, mostly in South Africa,
found they can no longer trust people in Zimbabwe to pay, so they've
stopped supplying."
That has left some manufacturers
unable to produce and export, another blow to the country's hard
currency earnings. Even entirely locally produced commodities such
as cotton and tobacco, once big money earners for Zimbabwe, have
been hit because they require imported pesticides, fertilizer and
fumigants.
Last year the government
introduced drastic price cuts and controls to try and curb raging
inflation, but the measures proved a miserable failure. Retailers
were ordered to slash prices. Buyers surged into the shops to pick
up electronic goods and luxury items at a fraction of their value
-- but when the shelves were empty, products were not restocked.
For a select few all
of this is an opportunity. They deal in the official exchange rate
of Z$30 000 to the US dollar -- meaning they can buy hard currency
at one three thousandth of what it costs on the street. Such rates
are only available to Zimbabwe's super elite.
"Only senior people
can get that, but those that do make a fortune," Robertson
said. "They buy dollars at the official exchange rate and then
go off and buy a Mercedes in South Africa for what is in reality
just a few dollars. They import it, sell it and make a killing.
"These are the same
people who are running a lot of the food imports. They take a billion
[Zimbabwe] dollars, change it to rand at the official rate and buy
in South Africa for next to nothing."
Some economists trace
the start of the economic downturn back to the mass printing of
money to pay off war veterans who were threatening Mugabe a decade
ago. But Robertson says the most significant blow to the economy
was the redistribution of white-owned farms without maintaining
productivity.
"Those 4 500 farms
were Zimbabwe's biggest industry," he said. "They accounted
for 17% of GDP in their own right but more than 50% when you take
into account the other industries they were supporting.
"They employed large
numbers of people, they accounted for half the export earnings.
The farmers were also the biggest users of other industries such
as insurance and engineering."
There is no chance that
the land redistribution will be reversed. It has overwhelming support
among black Zimbabweans as a policy, if not how it has been handled.
The redistributed farms
are now run on feudal lines with Zanu-PF acting as overlord and
anyone wanting to stay on the land required to pay suitable political
and, in some cases financial, homage. Those who dissent, and that
includes overt support for the opposition, are thrown off.
What industry remains
is subjected to the "indigenisation law". This requires
foreign and white-owned public companies to sell or give half of
their shares to black Zimbabweans. In the view of some, it is just
another form of plunder.
As a result many of the
jobs once considered the least desirable are now among the most
sought after. There was a time when being a domestic worker was
considered close to the bottom of the pile. It was poorly paid and
often required women to be away from their families.
But today it is a prized
role, as it comes with free accommodation, water, electricity and,
crucially, no travel costs.
Robertson wonders how
long Zimbabwe's economy can keep going.
"Everything seems
so untenable and so absurd you can't believe there are people out
there trying to keep it on the road. They're breathing life into
a dead horse. You have to admire it I suppose," he said.
165 000%
The current level of inflation means the income of most Zimbabweans
is way out of line with the cost of living
Z$190m
The black-market exchange rate for Zimbabwe dollars to the pound.
Last week the rate was Z$90m to the £1
Z$30 000
The amount needed to buy a US dollar under the official exchange
rate, only available to the elite
£25
The cost of a Mercedes Benz bought using hard currency from reserves
exchanged at the official rate
£750m
The amount Zimbabwe earned from exports last year, which was about
a third of the amount a decade ago
35%
The proportion of hard currency from export sales that businesses
have to hand over to the government
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