Zimbabwe’s economy sliding backwards again

via ‘Zim economy sliding backwards again’ – DailyNews Live 16 FEBRUARY 2014

The potholes on Melbourne Road in Southerton, an industrial district of Harare, Zimbabwe’s capital, are bone-jarring.

A van outside the J. Lyons factory, a surviving outpost of a once-grand British company, is being loaded with jars of processed food. Otherwise the street is quiet.

The offices next door have whitewashed windows; the gates of the factory opposite are firmly shut.

The empty buildings belong to Reckitt Benckiser, an Anglo-Dutch company whose brands, including Dettol disinfectant and Nugget shoe polish, span 60 countries — but no longer Zimbabwe.

The Reckitt factory there closed before Christmas and has not reopened. Many other local firms have done the same.

The closures are just one sign that the economic recovery is stalling. This began in 2009 when the worthless Zimbabwe dollar was replaced by a multi-currency system based largely on the American dollar.

But in the run-up to Christmas some banks were forced to put limits on cash withdrawals.

SABMiller says lager sales tumbled by 25 percent in the year to the fourth quarter, as beer-drinkers switched to cheaper brews based on sorghum.

Consumers started to feel the pinch in the second half of last year, says Albert Katsande of OK Zimbabwe, a big retailer. Prices are being cut to encourage shoppers to spend more.

A country ravaged by hyperinflation, which officially reached 500 trillion percent in 2008, may soon have deflation.

The rot set in around the time of elections, in July, which gave a thumping victory to Robert Mugabe’s Zanu PF party and brought an end to its four-year coalition with the Movement for Democratic Change (MDC).

Observers reckon that the result was largely achieved by a massive but cleverly contrived fraud, in particular through the manipulation of the voters’ roll to exclude people likely to back the MDC.

But factory closures, angry queues at banks and wilting sales offer a harder-to-rig verdict on the new government.

Most harmful is its pledge, under the rubric of “indigenisation”, to force all foreign- and white-owned businesses to cede a 51 percent stake to black Zimbabweans. This is chasing away foreign capital.

A  pay rise for civil servants will further strain public finances already stretched by dwindling tax revenue.

And the government’s growing list of unpaid bills is restricting the precious cash-flow of private businesses.

Nor is there much faith in policymakers. Mugabe appointed a Cabinet in September after a delay of six weeks.

Its make-up was shaped more by a need to balance factions within Zanu PF than by the needs of the country.

Patrick Chinamasa, the new Finance minister, delayed his annual budget until December, then jauntily forecast growth at 6,1 percent of GDP in 2014 after a 3,4 percent increase last year.

Yet in reality the economy was probably flat in 2013 and is unlikely to do much better, says John Robertson, an independent economist.

Moreover, it seemed clear from the budget statement that, despite the pleas of local businessmen, there would be little flexibility in the application of the indigenisation laws.

In any case, the legacy of hyperinflation limits Zimbabwe’s choices.

The factories in Southerton have out-of-date machinery because industry could scarcely invest for the long term when its costs were spiralling upwards. The switch to the American dollar brought stability, but at a cost.

As the dollar rises in value against other currencies in the region, such as South Africa (SA)’s rand, it makes Zimbabwean business less competitive. Banks have no reliable backstop because Zimbabwe no longer prints the money it uses.

Savers will commit their money to deposits of 90 days at most.

Banks can safely lend for long enough to finance a grocer’s turnover, but not to retool a factory or build a hotel.

The supermarket shelves are still full, but two-thirds of goods are imported. Export revenue does not come close to covering the import bill.

The current-account deficit last year was around 23 percent of GDP, according to the budget statement, and was funded by a mix of remittances, foreign aid and hot money lured by the high interest rates offered by some banks.

Dollars have become scarcer, in part, because those sources are less forthcoming. Remittances from the millions of Zimbabweans who work in SA are likely to shrink because of the stagnating economy down there.

Western governments are charier about dishing out aid that goes through a government they cannot trust.

And the flow of hot money has slowed because of bad debts in locally owned banks.

Zimbabwe needs long-term capital to upgrade its factories, roads and power stations. Meagre local savings means this must come from abroad.

A group of businessmen recently toured Europe to woo investors.

“In all locations, indigenisation is the number one issue,” says Charles Msipa, head of the Confederation of Zimbabwe Industries, who led the delegation.

Companies, he says, are loth to invest in ventures they cannot control. Foreign businessmen fear they will not be able to claim an adequate share of the profit.

A stamp of approval from the IMF would make foreigners more comfortable, says Msipa.

But a staff-monitored programme has already had to be extended by six months because of missed deadlines by the government, including a promise to account more clearly for revenue from state-owned diamond mines.

A deal to clear Zimbabwe’s huge foreign debts, including money owed to the World Bank and IMF, seems impossibly distant.

But without it there can be no large-scale official borrowing by the government.

Chinamasa recently went to China to drum up cash, but returned empty-handed. China, on the business front, is proving no softer a touch than the West.

Fears are growing of a new fiscal crisis and even of a return of the Zimbabwe dollar, if the government can find no other way to keep itself going than printing money.

So Mugabe and his government are stuck.

Tendai Biti, who was the MDC’s austere and widely respected Finance minister in the coalition government, says there are easy fixes for the economy’s troubles: “Talk to the West; balance the books; and manage expectations to instil confidence.”

 

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30 comments on “Zimbabwe’s economy sliding backwards again
  1. Kabunga says:

    Another easy fix would be to reverse the indigenisation law. Who on earth invests in or starts a company that they have no control over? People should be taught and be able to benefit from financially backed opportunities to start their own businesses so that they become successful because of their own hard work and abilities.

    • Jrr56 says:

      Exactly Kabunga, Zimbabweans have become used to reaping what they did not sow and as we all know “easy come easy go” started with the Farm Seizures and has continued into indigenisation. For the so called “well educated” population, they are not productive and seem to have no idea of how to get out of the predicament they are in. They will all blame Mugabe, which right as it may be, but have done nothing to have him removed. They all sat and watched him steal the elections year by year and shook their heads, then looked to see how they could get onto the band wagon.

  2. Chaka says:

    How much does it cost a delegation to travel just to beg, n then come back empty handed? Proper planning wd show that some trips r unnecessary. Use internet n tele conferences rather. Surprised that none of them thinks, its what they were elected for. God save Zimbabwe.

  3. John Thomas says:

    Bye bye ZANU we do not want you here

  4. roving ambassador. says:

    Zanu is the problem. Zanu must go, end of

  5. Owen says:

    great hardships all around… very sad.

  6. Agog says:

    Do not be in any doubt that “indigenisation” is a pseudonym for patronage, for rewarding people who have been rewarded countless times over but whose greed knows no boundaries. “Liberation” means liberating the country’s wealth for personal gain.

  7. mandy says:

    For once well said roving ambassador. “It is Zanupf stupid!” It has always been that way since independence. No housing. No jobs. No economic growth of note. Really nothing to write home about except Mugabe’s violence, Mugabe’s election theft, Mugabe’s corruption, Mugabe patronage, Mugabe selective application of the law, Mugabe land grabs, Mugabe Cio, Mugabe military all wrapped around the personalisation power by the one man. But Ceasar would not been wolf if Romans were not but sheep. Let us not focus on Tsvangirai. Instead let us focus on Mugabe and how to get him to depart. But he would not have done all this without the support of those grovelling idiots, Mnangagwa, Mutasa, Chiwenga, Nyikayaramba and now Jonathan Moyo Mzembi. They are equally as bad, only for condemnation into the pits of everlasting fire. And no effort effort must ever be spared that lot if Zimbabwe is to be Zimbabwe enough.

  8. Mahlaba says:

    Trying to lure investors when Zanu is still in charge is like trying sell rotten fish.

  9. Jono Austin says:

    I’m sure there will be ‘cast iron guarantees’ made soon that your investments will be safe.
    They will try desperately to spin it that the West wants to ‘reengage’ with Zimbabwe and assure investors. They will always have immoral idiots like Anglo American (nothing personal, it’s just business) to buttress their position.

    ‘And the government’s growing list of unpaid bills’ except for paying for new Mercedes and Range Rovers-these they always have money for.

  10. munzwa says:

    get rid of that bloody stumbling block!!!!!

  11. Daniel says:

    The A team used to say “I LOVE IT WHEN A PLAN COMES TOGETHER!!!”

  12. Wezhira says:

    Surely the economy has shown signs of deterioration. In one of the high density where i stay we used to have water cuts once a month during the GNU. But now water is now coming once a month. Mvura yanetsa zvakaipa

  13. Only a New Rhodesia will bring the much needed massive investment and prosperity, with a contented and happy life for all. The Zimbabweans have to realize and accept that they were tricked and deceived into believing that the Rhodesians were there their enemy. They have to realize and accept that they fought and died in a liberation war for nothing. Pull down the Zimbabwe flags and fly the Green and White of our New Rhodesia on every flagpole! The Rhodesians will return in their thousands, to re-build the great country, that it was!

  14. Hutu says:

    Rhodie Homecoming You are a disturbed delusional man.

  15. Save says:

    Even if the Indegenisation policy is removed, no investors will come to Zimbabwe because the same audacity used by ZPF at 1st can be used again, so the key issue here is the removal of ZPF.

  16. Reply to Tiger Shona and Hutu. There are estimated 2 to 3 million Zimbabweans in South Africa. A few have set up successful businesses themselves, and the others find employment with white South Africans and Rhodesians. We employ them ourselves. They all want the Rhodesians ,black and white to return home. Hutu; If I am disturbed and delusional; – Why are all these Zimbabweans here, and more crossing the border every day, for a better life in South Africa?

    • Hutu says:

      I will not argue with you over what I think is a comment that tries to undermine others. The countries name is no longer Rhodesia and if you want to refer to your self as Rhodesian you obviously think that black people are inferior. The problems in Zimbabwe are caused by a Dictator and that’s it. It has nothing to do with anything else. Why I say that you are delusional ( Someone who is not thinking clearly, or thinks something will happen that, in all likelyhood, will not) is because you think that people would choose a lesser evil.You are wrong. As much as that was a time of plenty it was also a time where one black people were discriminated against. A lot of us black and white have buried those demons and are trying to bury this one, but occasionally someone tries to get us to relive them.

      • As long as Zimbabwe’s leaders want to give those that would want to invest in the country unworkable conditions the economy will continue to slide downward.As long as the corruption continues unabated we will remain stagnant. As long as Politicians interfere with the workings of the Captains of industry we remain still. As long as the chaos on the farms continues we will be slaves of our neighbors for food. As long as tribalism, racism and regionalism are not tackled we remain unstable. As long as elections are rigged we will have poor Politicians representing us.

      • Reply to Hutu. We lived in Rhodesia for many years. I was a student at Milton Senior, and was later, also a lecturer at the Technical College, teaching black and white Rhodesians. I have never thought of black people, or any other race, as inferior. On what basis do make this conclusion? The people installed their Dictator in 1980, promising them all,- Freedom. Tell me, exactly what is this freedom the people voted for in 1980? and have voted for in every election since? (To continue voting for it, you must be completely happy with it, then, back to my question;- Why do we have 2 to 3 million Zimbabweans, here in South Africa, – who want the Rhodesians to return, to re-build the country? )

        • Hutu says:

          You know all the answers it seems. Like how you know I voted Zanu into power. I have never voted for Mugabe and you are wrong. You are a Milton boy. Read the English language as you were taught. I answered your question. Ln case you did not comprehend here goes”The problems in Zimbabwe are caused by a Dictator and that’s it. It has nothing to do with anything else. ” reread and you will find that in my last. And that’s also if you have interveiwed all the 3 million people you speak of.

        • Straight Shooter says:

          Rhodie
          Lets try to keep to the straight and narrow and remain factual.

          How do you know there are two to three million Zimbabweans in South Africa?

          What methodology did you follow to arrive at that figure, given the fact that most of these people are illegal?

          Zim itself claims to have a population of 13 million people – what then is the exact population of that country?

      • Straight Shooter says:

        Hutu
        I am a black perso and a Mthwakazi but I very much prefer to be called a Rhodesian than Zimbabwean. The reason is simple – the country was founded by Cecil John Rhodes, from which the name Rhodesia is derived. It was not founded by whoever Zimbabe is – this is an undeniable fact.

        I associate myself with Rhodesia, not only for these reasons but for the law and order it represented (the unfairness of some of those laws is a separate debate altogether); the standards in virtually everything the country was all about, viz education, health, sport, environment/cleanliness; infrastructure, hard work, honesty and integrity in leadership and the general citizenry.

  17. Hutu. I require direct answers from you. If the President is an unwanted Dictator; Why do the people vote for him at every election since 1980? Why are the 3 million Zimbabweans here in South Africa , running their own businesses, or employed by white Rhodesians or white South Africans? If you will not or cannot answer these two questions, I will answer them for you. Await your reply!

    • Hutu says:

      Because he has rigged elections from way back and continues to do so. The other thing is these are desperate people with no jobs so they look for employment where they can get it. You don’t need to give me any answer as by now you know I am not dumb.

    • Straight Shooter says:

      Rhodie
      Mthwakazi/Matebeleland never voted for gukurahundi Mugabe in 1980 and 1985. This is a well known fact – so please spare us. Our small population has always meant that whether we vote for Mugabe or not, it never makes any difference.

      The 1980 and 1985 elections are what led to the current dictatorial rot we see in Zim today. This is the time when Mugabe managed to eliminate all opposition through gukurahundi and thus entrenched his rule through ZANLA-only appointments to the judiciary, military, police, prisons, civil service and the CIO.

      Why do you think Mudede has remain the Registrar for so many years; long after he has been due for retirement? This is exactly why elections will never remove Mugabe from power.

      And by the way Rhodie – white Rhodesians were also culpable in creating Mugabe; so, dont excuse yourself from this rot. It was Gen Peter Walls who at the instruction of Mugabe as Prime Minister was used to crush ZIPRA at Entumbane. It was him and his cohorts who were used to crush the so-called dissident problem, which ZANU PF created as a pretext for the elimination of Joshua Nkomo and hios ZAPU.

      It was the white farmers who did nothing to advance the land redistribution programme in order to undercut Mugabe’s later years populist rhetoric on land that eventually landed us in this mess.

      So you see, one way or the other you are also culpable!!

  18. Straight Shooter says:

    Hutu
    I am a black person and a Mthwakazi but I very much prefer to be called a Rhodesian than Zimbabwean. The reason is simple – the country was founded by Cecil John Rhodes, from which the name Rhodesia is derived. It was not founded by whoever Zimbabwe is – this is an undeniable fact.

    I associate myself with Rhodesia, not only for these reasons but for the law and order it represented (the unfairness of some of those laws is a separate debate altogether); the standards in virtually everything the country was all about, viz education, health, sport, environment/cleanliness; infrastructure, hard work, honesty and integrity in leadership and the general citizenry.

    Your so-clled Zimbabwe is far from this and I dont think it will ever be – never mind the tribalism and racism!!

  19. Hutu. Thanks for your honest answers here.I will now put the following situation to you, for you to consider and comment on.– Way back in Ian Smith’s time, I was lecturing City and Guilds subjects, at the Tech. These are excellent courses, designed to give the students very good Skills training,- to enter the rapidly expanding industries and development projects, throughout Rhodesia. But how can these students benefit and improve their Skills,when the the population is forced to believe that the white Rhodesians, are the enemy? Work opportunities in industries and farms were starting to be destroyed in a civil war! To this very day, all the responsible government functions are failing, including the transport systems,water and electricity supplies, hospitals and schools, and many others, – all because of no skilled people left in the country to maintain them. The millions of Zimbabweans, here in South Africa, are working very hard to learn new Skills, to be readily employed, and to employ others. It might take them six months or even three years to learn the type of Skill required to sustain themselves, and their families here and at home in Zimbabwe. These are part of the family of New Rhodesians, working with the the white community, waiting to re-build the country. Therefore, the civil war in Rhodesia was never an anti-white Rhodesian war. It was carried out by that section of the population,still locked into the idea that to survive, you must kill,- kill the animals, kill the man who has the cattle, take his cattle, and take whatever he possesses. Kill or be killed! and destroy everything in his path, the farms, the food supplies, with the total destruction of the lives of others, the destruction of the country, and himself. The shooting down of the Viscount, and the murder of the survivors on the ground, was never a race war. Just kill those that have, and take what you want for yourself! This attitude to life has no place in civilized society, then and now! The people who carry out these atrocities, have no marketable skills, they have become vermin in society because they were tricked and deceived into believing the Rhodesians were their enemy!

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