Back to Index

Zimbabwe has reached a tipping point
Greg Mills, The Sunday Independent (SA)
October 19, 2008

http://www.sundayindependent.co.za/index.php?fArticleId=4668376

In Harare, outwardly little has changed over the past 20 years. Only the queues give a clue - for the taxis, for fuel, for visas to South Africa and Britain and, longest of all, to withdraw the daily allowance of $3 at the banks. The city still has the same wide, jacaranda-lined avenues, and downtown is bustling - until the evening that is. At night, the city is shrouded in darkness, with few street lamps functional and very little traffic flowing. But this sign of decay understates the extreme failure of the inner workings and the consequent extent of the socioeconomic crisis. First, the country is nearing starvation. Estimates put the number of "food insecure" in the country at nearly 6 million by April next year. Second, Zimbabwe is bankrupt. The statistics about levels of annual inflation (officially 231 million percent, but estimated to be more than 1 billion percent) give an indication of the challenge of surviving there.

Although the fat cats with political access continue to cream it, those at the bottom of the socioeconomic pile are struggling. For some pensioners, the value of the cheque in the mail is now less than the stamp on the envelope. Cash in Zimbabwe has a premium, given its scarcity, hence the queues outside the banks. But firms now pay their staff not in foreign exchange (which it remains illegal to do) but in foodstuffs and fuel coupons redeemable in United States dollars. The bourse has attained record profits in this environment as its remains the best and, apart from the burgeoning real estate sector, only hedge against inflation. Typically, a manager will "park" his revenue in shares at the beginning of each month and sell only as he needs the cash for wages and bills. It has made Zimbabwean managers exceptionally skilled and numerate, but increasingly demoralized as they see little prospect of relief ahead.

As one property chief executive put it: "Can you imagine that I should spend so much time getting toilet paper? Since the manufacturer closed down and my tenants expect it, I have to spend much energy trying to find and stock it." Rentals are now adjusted monthly and likely fortnightly if current trends continue. Although some businesses can apply for a licence to trade in foreign exchange, known as a Foliwar, inflation has priced goods beyond the means of most, not least given the factoring in of the high cost of the licence and 15 percent turnover tax levied by the government. One US dollar might buy a small packet of meat or a bar of soap. Third, the country is no longer at work. Those Zimbabwean industries that remain (about a quarter of the number at the start of the decade) are probably running at about 5 percent capacity. Teachers are paid little more than $3 a month, yet the 200 000-strong civil service continues to function, or at least go to work. What hope for political change and economic recovery? Many observers believe that the ruling Zanu PF is not ready for change, that the ongoing negotiations are a stalling tactic to regroup or an attempt to co-opt the opposition. But eventually the economy will force change peacefully - or the regime will change itself through a palace or military coup - and a new dispensation will emerge. In the minds of most seasoned observers, the country has reached a tipping point and change is imminent, though possibly not without further violence and upheaval. Presuming a legitimate government emerges in the short term, what might recovery involve?

First, the currency has to be stabilized and inflation brought under control. This can be done through dollarisation, as is happening already, or through a currency board limiting money supply to economic production. Second, get the traditional economic drivers reinstated. The farming sector is a priority. If things don't change, many Zimbabweans will remain vulnerable, and the rest of industry cannot recover. The debate has become fixated on compensating the 4 000 white commercial farmers who had their land seized. It might ultimately be necessary to reinstate the rule of law and the rights necessary for the collateralisation of property, but it is not the first step. That is to get the farms working again, producing food and ensuring the crisis does not worsen. That depends on removing price controls, improving farming production techniques and providing the banking sector with the finance needed to lend to farmers. Once a maize exporter with a peak production of 2 million tons, Zimbabwe's production this year was little over one quarter of this figure. At present, communal farming yields an average of 270kg per hectare (down from about 800kg at independence in 1980), compared to intensive farming sectors touching four tons. The best way to improve yields is through private-sector linkages and logistics, providing seeds, financing, fertiliser and knowledge to smallholder farmers. This will never happen when the government price offered for maize is effectively $1 per ton, offering little incentive to produce more than the immediate family's needs.

The third step is to invest in neglected basic services, notably power and water. And the fourth, and medium-term step, is for Zimbabwe to make the far-reaching reforms necessary (but never carried out) in the mid-1990s, to liberalise the economy and bring it onto a competitive footing. This includes reform of the bureaucracy, lowering and streamlining of tax and tariff regimes, and the exiting of the state from business. The bill for the above is likely to be more than $1 billion annually. Many Zimbabweans seem to believe that the international community is lining up to assist, though they may be underestimating donor caution about the pace and extent of political reform. Despite the decay, Zimbabwe still has a number of tremendous advantages, notably in the top-class education system and the fact that it once had a well-functioning economy. But the next six months are crucial. If planting does not happen before mid-November many people will be at risk. But to get the necessary finance and skills to stay or return more than cosmetic changes are required. As Tendai Biti, the secretary-general of the opposition Movement for Democratic Change argues: "We are at a moment like Ian Smith in 1978 with the Rhodesia-Zimbabwe 'settlement'. You can put make-up and mascara on a Frankenstein, but few men will give it whistles. There has to be a ready paradigm for change."

*Greg Mills heads the Johannesburg-based Brenthurst Foundation

Please credit www.kubatana.net if you make use of material from this website. This work is licensed under a Creative Commons License unless stated otherwise.

TOP