Zimbabwe’s Economy Heads for Recession as Factories Shut

via Zimbabwe’s Economy Heads for Recession as Factories Shut – Bloomberg By Brian Latham May 27, 2014

Ephraim Takavarasha sits on the sidewalk outside Johannesburg’s central bus station, wondering how long it will take him to sell his four cases of electrical sockets, mobile-phone chargers and alarm clocks when he returns to Zimbabwe.

What was once a monthly 1,200 kilometer (746 mile) trip that Takavarasha, 25, took from Zimbabwe’s capital, Harare, to South Africa’s commercial hub, has become a visit every second month. Cash-strapped Zimbabweans aren’t spending, deflation has taken hold, factories are being shut and the economy is heading for recession less than a year after President Robert Mugabe, 90, was voted back into office to extend his 33 years of rule.

“I used to spend about $5,000 a month to make a profit of about $1,000 a month as a cross-border trader, but no one’s buying now,” Takavarasha said in an interview, as he hugged his knees against the cold night air. “It’ll take me two months to move this,” he said, pointing to his cases.

Five years after Zimbabwe emerged from recession, ended hyperinflation by abandoning its local currency and spurred farming production, the economy is at risk of contracting again. Foreign currency needed to pay wages and buy imports has dried up, Mugabe’s government has given investors mixed signals on plans to seize company stakes as part of its “indigenization” policy, and factories are operating at just 40 percent of capacity.

Voting Irregularities

“We’re already in recession and the economy will probably shrink by 1 percent this year,” John Robertson, an independent economist, said by phone from Harare. “Even if government does act on its promise to soften indigenization laws, it’ll take at least a year before foreign investors build factories or sink mines.”

Mugabe won a July election that his main rival, Morgan Tsvangirai, called a sham and local observers and the U.S. said were marred by voter irregularities. Mugabe’s Zimbabwe African National Union-Patriotic Front won two-thirds of the seats in Parliament, ending a four-year power-sharing government with Tsvangirai’s party.

Under that coalition, the economy had begun expanding following a 40 percent contraction in the previous eight years. Hyperinflation, estimated by theInternational Monetary Fund to have peaked at 500 billion percent in 2008, came to a halt when authorities dropped the Zimbabwean dollar, ending the central bank’s ability to print money to pay the government’s debt. Zimbabwe now uses a multi-currency system that includes the U.S. dollar and South African rand.

Tobacco Recovery

The recovery spurred investment from Pick n Pay Stores Ltd., South Africa’s second-biggest grocer, and Tiger Brands Ltd. (TBS), the Johannesburg-based maker of food products such as Jungle Oats.

It also fueled agriculture, with tobacco output surging more than three-fold to 167 million kilograms in the five years through 2013 and set to reach 180 million kilograms this year. Production had slumped following Mugabe’s 2000 land reform program that saw the government seizing commercial farms owned by white landowners to give to black Zimbabweans, many of who were subsistence farmers.

That progress is now at risk. Retail sales fell 30 percent in February from the previous month, while 15 factories in the metals and engineering industries closed in the period, the Finance Ministry said in a monthly report on its website. Consumer prices declined for a third consecutive month in April, reflecting depressed demand.

‘Pretty Bad’

“There’s no clear sign of a way out of the difficulties,” Thea Fourie, an analyst at IHS Inc. (IHS), a global business research company, said by phone from Johannesburg. “It’s pretty bad in Zimbabwe right now.”

Zimbabwe’s benchmark stock index has slumped 15 percent this year, the worst among 14 African stock markets tracked by Bloomberg.

Central bank Deputy Governor Kupikile Mlambo said on May 23 the economy will probably expand 3.1 percent in 2014 and “we might see it sliding into negative territory next year.

Finance Minister Patrick Chinamasa has said a law that forces foreign and white-owned companies to cede 51 percent stakes to black Zimbabweans will be eased. The government is working on a ‘‘sector by sector’’ plan and won’t compel all foreign-owned companies to sell, he said on April 23.

Platinum Reserves

‘‘Although some investors might see the apparent softening of rhetoric on indigenization as an opportunity, which would provide some relief to the liquidity crisis, the minister’s announcement underlines the uncertainty of the policy environment and the high level of state intervention,” Mike Davies, an analyst with Cape-Town-based Kigoda Consulting, said in an e-mailed response to questions.

Zimbabwe has the world’s second-biggest platinum and chrome reserves after South Africa and also produces gold, coal and iron ore.

The ruling ZANU-PF is now considering the return of the Zimbabwe dollar to help boost liquidity, three members of the party’s decision-making body said on April 23, declining to be identified because the discussions are private. The move will be unpopular and will only be implemented as a last resort, the people said.

For cross-border traders like Takavarasha, remaining in South Africa as an undocumented immigrant is becoming more promising than trying to sell goods in Zimbabwe. The Johannesburg-based University of Witwatersrand estimates that as many as 1.5 million Zimbabweans, or more than a 10th of Zimbabwe’s population, live in South Africa.

“The profit is less and less and there’s no work in Zimbabwe,” he said. “The economy is going down. Maybe it’s best to leave for a couple of years and wait and see.”

To contact the reporter on this story: Brian Latham in Harare at blatham@bloomberg.net

 

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27 comments on “Zimbabwe’s Economy Heads for Recession as Factories Shut
  1. andy says:

    Batten down the hatches the total collapse is getting nearer and nearer, if you can then try to stock up with tinned supplies as all he’ll is about to break loose and nobody is going to come to the rescue. This is a man made, or rather a zanu made disaster. Soon there will be looting of shops and a complete breakdown of law and order as they will be unable to pay the police or the army. R.I.P. Ids

  2. I am not the one! says:

    cant wait, long overdue. I am sure the race card will be abused widely so as to try and shift the blame.

  3. andy says:

    And the ” illegal sanctions ” which prevent the bunch of goons from travelling to places like Harrods in London to spend their ill gotten gains is clearly to blame._

    • publicprotector says:

      @ Andy economic sanctions exist and affect all of us unless you believe the propaganda and are a little thick.
      Try using PayPal it will give an error message stating that you cannot access it from this country due to sanctions by the US treasury and FSA in the UK.
      Target sanctions affect everyone its only the dim that don’t understand targeted means all who live here.
      Propaganda journalist promote the view that its just a few individuals because they don’t understand business and are dim.

      • Parangeta says:

        “PayPal” ‘targeted sanctions’ what a joke ‘PubicProtector’.

        Read this –

        “A couple of weeks ago, a friend pointed us to the fact that PayPal had relaxed the location based restrictions. User of the platform can now access PayPal and make payments and other transactions from Zimbabwe. We tested it ourselves here and indeed we could create an account, check the balance and other such simple processes.

        The issues though is that PayPal still doesn’t consider individuals and businesses with Zimbabwean physical addresses eligible to have PayPal accounts. You have to use a non-Zim physical addresses to register an account. Your cousin’s South African or Botswana address maybe? Crazy still hey.

        We are not sure what caused the slight relaxation of the rules here. We contacted PayPal at least twice to get more information and we did not receive a response. Some information we have however suggests that the US Embassy in Zimbabwe communicated with PayPal and told them to stop with the over zealousness. That they were needlessly adding fuel to the “sanctions are not targeted” mantra by not letting ordinary Zimbabwean companies and individuals use the service”.

        Blame Mugarbage for all this bullsh**t!

      • What a load of rubbish. PayPal can only be introduced in a country that has a Banking sector that is capable of handling the services it offers. If you have a foreign account you can do the transaction from Zimbabwe because your account will be in a country that has the capability of handling the service. This is not only Zimbabwe that has a problem. Try using PayPal with a bank account that is in Pakistan.

  4. muntu says:

    To show how evil Mugabe is (as if we didn’t know already), he calls that time of economic recovery during the GNU “satanic period….gehena/hell”.

  5. Owen says:

    terrifying! good time to move your liquid assets to Singapore!

  6. Jrr56 says:

    Zimbabwe taken back to the times of Lobengula by Mugabe et al.

  7. Will the Doctor says:

    Good – I’m glad. Let them suffer. They shouldn’t have stolen the farms and elections.

  8. publicprotector says:

    John Robertson is not a local independent economist.
    To be an economist you need a degree in the subject and some expertise.
    In 2000 When a dutch economist working for the world bank visited Zimbabwe , she wrote after three years research into Zimbabwes exconomy, it is sad that only self proclaimed economists exist and tend to lead the country to economic crisis through negligence, lack of knowledge and subsequent publicity by the local news media.
    Laterally after her three year long local economic evaluation of Zimbabwe, accepted by the UN, she became economic advisor to the UN.
    She said given the economic might and expertise of the UK and EU Zimbabwe had no chance with only local know all’s to combat same as the EU sought to bring Zimbabwe to its knees in order to try and effect regime change. She stated that the Zimbabwe Government had no economic case to answer in the circumstances.
    You will still get know local know all’s who think that our local inexperienced self proclaimed economists are brilliant like this journalist.
    Amazing what you find out with a little time spent on research instead of promoting fiction and propaganda.

    • zim reeper says:

      APO,PP ZANU THUG WHICH ONE ARE YOU ?? all 3 I presume and the only “DIM” one here.Stick to the herald and your ilk.zanu GOON!!!

    • Mwanawevhu says:

      I don’t care about your research. My stomach is the expert I listen to and it’s telling me that Zimbabwe is being run by idiots who would do anything to hold on to power including sacrificing poor me.

    • Parangeta says:

      Your English grammar, syntax and sentence construction is laughable. You shame the Zimbabwean claim to Africa’s most literate population, PubicProtector!

      You must never have attended those British, EU and USA sponsored/paid for, Zimbabwean schools.

      Here’s an example –

      “You will still get know local know all’s who think that our local inexperienced self proclaimed economists are brilliant like this journalist”. What the hell does that mean?

  9. publicprotector says:

    @Andy illegal sanctions affect us all in Zimbabwe.
    Only the very thick and dim don’t realize that and listen to propaganda – try using PayPal from Zimbabwe whoever you are. You are told you cannot access it due to US treasury sanctions and FSA sanctions from the UK.

  10. Felixstowe says:

    Zimbabwean future is doomed. No one not even china will invest in a country knowing that your assets could be stolen at any time. People who have no jobs no future can do something about it . They should rise up like a volcano and the ashes will bring new green shoots . This can only be done when law and order is brought back and investors feel safe. For now invest in South Africa instead.

  11. Ngoto Zimbwa says:

    The sad thing is that its the ordinary man who is suffering.

    Those responsible for the mess are living well.
    The ordinary man needs to wake up from his stupor and say enough is enough.

  12. Petal says:

    Is it possible Mr Editor to compile a list of all companies that have shutdown or contemplating shutting down region by region??

  13. Petal says:

    including another list of all companies affected by the so called indigenisation region by region?

    • Parangeta says:

      Patel, it would be easier and shorter to compile a list of Companies NOT affected by Mugarbage/Gonorhea economics, don’t you think!

      Do we have enough printer ink for the list of those shut down or shutting down…in fact probably 80″ by end 2014!

  14. zanupf fear me says:

    Cretin propagandist public prosecutor only has pumpkin seeds in his neanderthal ZANU skull. Uneducated fool like his masters

  15. Mlimo says:

    publicprotector, payapl is a despised western invention you need to go down to the local witch doctor and try to use him to pay for something overseas. Send mugabe he flies around often enough.
    And with zanupf being in control of an economy that is so corrupt i am sure the managers of payapl would dread letting any zimbo near it in case of fraud and electonic rigging. vote mugabe out and see what happens and be proactive.

  16. Parangeta says:

    I agree, why support a despised, shame, shame, shame, Western entity like PayPal. Surely China has the equivalent service, or Singapore……

    Better to support our present-Colonists than our ex-Colonists!!!!! 我們的中國大師賽

  17. MikeH says:

    Frankly, the more I read the more I realise that the only answer is to shut the country down, just as a defunct company is shut down. If the management (mugabe&co in this instance) is a waste of space then there is no point in carrying on.

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