Zimbabwe is Again in Crisis by Eddie Cross 9 March 2014
You can never separate the economy from politics, the state of one affects the other and the current crisis in Zimbabwe reflects this truth. In 2007 the President of South Africa launched an initiative to try and get Zimbabwe out of the deepening economic and political crisis that prevailed at the time. Our economy was on the verge of total collapse, hyper inflation was spinning completely out of control and the political regime in Harare was isolated and regarded as a rogue regime by the great majority of the international community.
His intervention was remarkably effective, he quickly obtained the support of key political and economic constituencies – the SADC, AU and the G7 leadership gave him their support and over the next two years he guided Zimbabwe through a series of negotiations leading to the Global Political Agreement in September 2008 and the GNU Government in February 2009. However somewhere along the line, South Africa dropped the ball and Mugabe, ever the skillful opportunist, picked it up and with key support from the JOC (Joint Operations Command), scored the final try in this particular game in July 2013.
The only problem was that key constituencies have refused to recognise that final try, this has become quite focused in the past few months with a powerful quartet of the USA, UK and Germany adopting a hard line stance on the 2013 elections with the UK saying quite clearly that they were not a democratic reflection of the views of the Zimbabwe people. They all say that the elections were not free and fair and that the whole process was flawed by the failure to complete the GPA reforms before the elections were held.
Despite the support given by the SADC and the AU to the process, the refusal by these key States to recognise the new Zanu PF dominated government has created a real headache for South African leadership who wanted the issue of recognition to be one of the major outcomes of the GPA/GNU. From that perspective the exercise was a failure.
The second half of the situation emerging in Zimbabwe is economic – under the GNU, the bounce back of the economy was dramatic; revenues to the State grew from a paltry US$280 million in 2008 to US$4 billion in 2013. Foreign trade grew from US$600 million in 2008 to an astonishing US$11 billion in 2013. The new Minister of Finance negotiated the start of reengagement with the multilateral agencies of the IMF and a deal was signed by Mugabe in 2013. A possible debt relief deal was talking shape and Biti had secured the respect of the global financial community in recognition that at last there was some discipline and sanity in Harare.
What was not that clear was what was happening in that shadowy parallel government operated by the JOC. The JOC is a relic of the war of independence when Smith organised it to run the war effort. It was retained by the new government sworn in 1980 and in the past thirty years has grown to the point where it is virtually untouchable and has political ambitions. What was not anticipated in 2007; was that the JOC, cut off from traditional sources of funding, would stumble over the discovery of diamonds at Marange. Not just diamonds, the largest discovery of new diamond bearing ore in the world in over a 100 years.
In the following 6 years companies linked to the JOC in various ways extracted over 100 million carats of diamonds with a market value of about US$12 billion. These were the easy pickings at Marange in the form of alluvial diamonds in soft sand over a bed of rock. The revenue stream peaked in 2012 at nearly US$4 billion. Even allowing for “leakages” this gave the JOC a new lease of life and provided the essential funds for the July 2013 game plan which they executed with supreme confidence and skill and totally flattened the opposition in the form of the MDC and Tsvangirai.
The problem for the new government formed after July 2013, is that they found themselves in a government that was not going to be recognised by the key players internationally, did not have the confidence of the local business community and certainly did not have the confidence of global economic forces. The reaction of the market was immediate – US$1,5 billion fled the local bourse, another US$1 billion fled the banking sector and many local economic players who had been gradually emerging from the shadowy world of the informal sector, simply submerged back into the murky economic underworld that characterizes so much of the local economy.
The new Minister of Finance, a reasonable and competent man, simply could not cope with the outcome. A third of all the banks failed or teetered on the edge of failure. Revenues to the State from taxation started to contract and the decline is continuing. Pressure on him to deliver on the unrealistic promises in the Zanu PF manifesto compounded his problems. His inability to control the rapacious demands of the JOC and Mugabe, who sees the exchequer as a personal bank, was simply too much. On top of that in a shocking series of revelations, Ministries and Parastatals produced list of unpaid creditors amounting to well over US$1 billion at the end of 2013. All State controlled institutions and Ministries simply did not have the money to meet existing and current demands. Local authorities all followed suit and found themselves spending the majority of their revenues on salaries with nothing for anything else.
Compounding these conditions was the sudden collapse of the revenue stream from Marange – not because they have exhausted what remains but because the easy mining is over and the amateurs on site have been unable to work out how to mine the diamonds in hard rock. Right now, just when they need the revenues, Marange is closing down.
The economic crisis is immediate – the IMF is here on Monday with hard questions and the future of the debt relief and reengagement deals is in question, both critical to the immediate future of Zimbabwe. The Ministry of Finance is grappling with an impossible situation – they simply do not have the money to meet the basic needs of the country. They cannot feed the army or prisoners in jail. They cannot provide drugs and cleaning materials in clinics and hospitals, they cannot fund water treatment chemicals.
Then there is the political crisis, both the MDC and Zanu PF are engaged in messy and highly charged struggles for succession. No resolution are in sight for either Party and while this goes on the State is paralyzed and unable to come to grips with either the international problems related to legitimacy or the problems related to the contraction of economic activity across the board in the economy.
Neither Party seems to have the leadership that is capable of dealing with the myriad of problems that confront the country right now. This makes the present situation that much more complex and difficult than the one that confronted South Africa in 2007. Just when we need strong leadership with a clear vision of where they are going and what needs to be done, we have totally dysfunctional leadership in both major political Parties.
Sitting in the wings, waiting for the opportunity to intervene are the men and women who make up the JOC. Suddenly stripped of the bounty that was theirs from the Marange alluvial deposits and recognizing the impotence of the current political leadership, they feel that their time has come. The risk of intervention is very real and very dangerous. We all look again towards Pretoria wondering when the South African President will invite Mr. Mugabe to Loftus to watch rugby.
Eddie Cross Harare 9th March 2014