Zimbabwe, a nation on its knees

via Zimbabwe, a nation on its knees – NewsDay November 4, 2015

Zimbabwe’s economy is leaking like a porous sieve. On second thoughts, that is inaccurate the economy is crashing like a waterfall.

BY MAYNARD MANYOWA

As I write this, the majority of the country face 18-hour load-shedding. It is not even load-shedding anymore. It is borderline “garai murima”.

At an elementary level, the electricity crisis in Zimbabwe is more of an annoyance than a serious impediment. To the less busy masses, it is a depravation of entertainment, the likes of Soul Jah Love and Bev Sibanda.

To the common man, Zesa’s all day, most of the night power cuts, are a mere inconvenience, a boring and irritating propensity. But to the enlightened man, power cuts are an indicting sign of the end of times.

To put it into the analytic perspective it deserves, let us make a case in point with Sable Chemicals. Sable Chemicals is Zimbabwe’s sole producer of Ammonium Nitrate. The company, based in Kwekwe, about 210km southwest of Harare, employs over 500 people. Zesa initially forced the company to half its electricity consumption, before further reducing the supplies.

Consequently, and in retaliation Sable Chemicals, has shut down operations at its electrolysis plant. Some 500 people have also been rendered jobless, incomeless, and stranded. Soon the 500 bread winners will be homeless or facing the bleak possibility of living out of trash cans and vending oranges and tomatoes on the unforgiving streets.

Fertiliser manufacturers, who depend on Sable Chemicals’ production, will have no option but to follow suit and close shop. Subsequently, farmers will struggle to find AN fertiliser, which is critical to the country’s farming industry.

This single Zesa-induced shut down of Sable Chemicals will in a few weeks spiral out of control into a whirlwind that will leave well near or even over 350 000 people in the same situation as the 500; jobless, hungry and stranded.

Here is how and why. In economics, there is a phenomenon called the negative multiplier effect. In simple words, the closure of a local factory with the loss of hundreds of jobs will have a large negative multiplier effect on both the local and regional economy.
It derives from basic reasoning that one person’s spending is another’s income, so to lose well-paid jobs will lead to a drop in demand for local services, downward pressure on house prices and “second-round employment effects” for businesses supplying the factor or plant that closed down.

On the ground, the 500 workers who now find themselves out of a job will no longer be able to spend whatever they were earning at local shops, and schools. They will not be able to pay rentals, buy groceries, or pay for their utilities. This in turn means that, those shops will receive less and less money, resulting in losses and forcing them to shut down, in other words more job losses.

Summarily, things stand to follow this route — Factory closes = no jobs, no money to spend in shops = shops close down = loss of more jobs = loss of more money and services = service providers close down = loss of even more jobs + loss of more jobs = job loss spiral.

The negative event will keep multiplying, and cannot be stopped unless and until there is either a drastic shift in leadership, or a huge injection of cash into the economy (otherwise known as a bail out).

It is quite obvious that President Robert Mugabe is neither quitting nor relinquishing his post and will leave the State House destined for the grave alone. There are no prizes for an analysis as this one. Anyone who believes otherwise is in denial. Consequently, regime change as an option to halt the negative spiral is improbable, impossible, and simply not happening.

This leaves the country with one other option. A bail out. But then again, Zimbabwe does not use its own currency. We use the currency of the enemy, the US dollar. We cannot relive the ex-Reserve Bank of Zimbabwe Governor, Gideon Gono’s days of printing money out of bond paper to save ourselves. Having chased the goose that lays the golden egg, we must now bend or break.

Our neighbours and even our friends in the international community will not give us a bail out either. Our country is notorious and infamous for not paying debts. We borrow and loot. No country is willing to risk giving Zimbabwe a loan that will surely not be repaid.

Either way, when one seeks to borrow money, the lender has to assess the credit record of the borrower, assess his business plan, and his ability to use that money to generate more for himself and to use that money to repay the debt, with interest.
Now, Zimbabwe has a poor credit record, we also have no sound business plan, and everyone knows that should the country get a loan, the money will be looted grand style by Zanu PF stalwarts.

Hence Zimbabwe is not getting a bail out from South Africa, it is not getting a loan from China, and it will not get money from anybody for that matter.

What is mind boggling, if not mind blowing is that, in over 35 years of governance, the Zanu PF government did not build a single power plant. So today Zesa is on the brink of total collapse.

The power cuts have already led to one wave of job losses, dumping the country into a negative spiral of more job losses and doom. Mugabe is not leaving office, there is no bail out on the way, and the country on its knees is tottering towards total collapse and permanent ruin.