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MOVEMENT FOR DEMOCRATIC CHANGE
ECONOMICS
COMMITTEE
Economic Review of 2003 and Prospects for
2004
The economy in 2003 – an even more
disastrous year
Under Zanu-PF government, Zimbabwe’s economy has been declining every year since 1998, with the rate of decline increasing each year. On official figures, in 2002 GDP decline was 8.8%, while in 2003 GDP decline was 13.2%. The Budget Statement for next year, despite claims about the importance of its ‘supply-side measures’, projects a further 8.5% decline in GDP in 2004. In MDC, we think the economy has shrunk even more than this, but the official figures are startling enough, giving cumulative declines of 38% to the end of 2003 and 44% to end of 2004.
The cumulative reductions in GDP per capita are even more devastating. The legacy of the Mugabe epoch is such that it will take more than a decade of East Asian Tiger rates of growth in per capita GDP just to get back to Zimbabwe’s level of GDP per capita in 1998.
One of the major contributors to the sharp decline in GDP in 2003 was the demise of commercial agriculture and its replacement with a subsidy-dependent, low technology, subsistence-oriented small-scale farming sector. Tobacco was the most visible casualty, with production falling to 83 million kg in 2003 as compared with over 200 million kg in the past. The agriculture sector’s overall contribution to GDP has fallen to about half what it was at its peak in 1999.
Given the engine-room importance of agriculture in the Zimbabwe economy, the contraction of manufacturing and services linked to agriculture is hardly unexpected. The process has been hastened by adverse factors affecting every productive activity, such as the on-going interruptions in supply of fuel, coal, power, telecommunications, transport, water and shortages of other inputs to production processes.
The short-term solution to most of these problems has come to revolve around the shortage of foreign exchange. The availability of forex was sharply reduced by the parallel market restrictions introduced after the November 2002 Budget speech. Predictably, the effect of these measures was to drive the parallel market further underground, increase the extent of capital flight, reduce the forex available on the domestic market and drive down the value of the Zimbabwe dollar.
Merchandise exports are estimated to have declined by more than half since their peak in 1996, while import requirements have been increased in certain categories, notably staple foodstuffs. Zimbabwe went into arrears on foreign payments in the year 2000. Accumulated arrears are expected to reach US$3 billion by the end of 2003, twice the level of total exports. Total foreign debt (including arrears) is estimated to exceed US$6 billion, which is well over 100% of GDP. Domestic budget-related and parastatal debt has also grown sharply over the year, but the full extent of the implied future burden has not been revealed.
The Herald’s ludicrous claim that ‘despite the chronic shortage of foreign currency, the Z$ held steady at Z$824 to the US$’, is belied by the fact that on the parallel market the Zimbabwe dollar has lost approximately 80% of its value during 2003. The well connected continue to be given access to foreign currency at Z$824/US$ and resell it at rates in excess of Z$6,000. The seemingly irrational exchange rate mechanism remains in place because it is the principal means both for the looting of state assets and the externalisation of funds by the ruling elite.
Due to unprecedented inflation, the loss of purchasing power of the Zimbabwe dollar in the domestic market during 2003 is likely to be even greater than the 80% loss of foreign purchasing power. The acceleration of inflation during 2003 has been the most persistent and harrowing problem for the ordinary Zimbabwean citizen. In December 2002, year-on-year inflation was just short of 200%. One year later it will be at least 600% on official figures, while the actual experience of rising prices indicates that a much higher level of inflation is being faced by the average family in its daily struggle for survival.
Like the previous few years, 2003 will be a year most Zimbabweans will want to forget. For the majority eking out an existence in the communal and resettlement areas or the burgeoning informal sector, the ravages of inflation, and the shortages of food and other basics have turned life into a struggle for survival. NGOs working with rural and urban communities no longer talk of ‘economic development’, but rather of ‘coping strategies’.
People on fixed incomes, including pensioners, have been reduced to penury. The shrinking number of people in formal employment (around 900,000, down from 1,350,000 in 1998) have managed to have their wages adjusted but few have achieved increases which have kept pace with inflation. So even for the employed, 2003 brought more shortages, frustration, uncertainty and declining living standards. By the fourth quarter, many workers were finding themselves having to pay well over half of their wages just to get to and from work.
The disproportionate rise in the cost of transport is in part due to the cynical opening up of fuel procurement to private sector operators. The way this has been done, without any regulatory mechanisms to protect consumers and the general public, has provided new opportunities for the well-connected to grossly enrich themselves at the expense of ordinary people.
All of the problems households have been forced to face in 2003 have been worsened by the deterioration in government services. Despite the huge budget deficit, which is a major underlying cause of the economic crisis, expenditure in key sectors such as health remain grossly insufficient and inefficient. Despite the urgent necessity of addressing the HIV/AIDS pandemic, the government seems willing to see the health sector collapse entirely, reacting to the recent hospital strike by arresting and harassing the few doctors still willing to work in the demoralising environment of collapsing public health services.
Economic policies of the incumbent
regime
The incumbent government’s economic policies are a mix of denial and hypocrisy. The denial is symbolised by the unwillingness to confront reality and hence, for example, calling the devaluation from Z$55/US$ to Z$824/US$ in March an ‘export incentive’. Another example is the refusal to print banknotes with denominations commensurate with 500% inflation (and rising) resorting instead to expensive, temporary ‘bearers cheques’. No wonder that in common parlance these are called ‘burial cheques’.
The hypocrisy is more serious. The government tries to pretend that its economic policies are relevant to improving economic conditions for the poor, while in fact they’re designed to enrich people at the top and reproduce Zanu-PF legally and extra-legally.
The truth about Zanu-PF’s economic policies is the exact opposite of the party’s rhetoric – it is precisely the heady concoction of Zanu-PF’s mischievous economic policies which is responsible for accelerating inflation, declining output, shortages of basic necessities and widespread poverty.
Prospects for
2004
Arising from Zanu-PF misrule, all the existing adverse trends are set to continue in 2004 – fewer jobs, declining living standards, poorer health and education services, greater poverty, more oppression. The government intends to spend 20% more than the entire health budget just on the wages of what under Zanu-PF are the repressive organs of state – the army, air force, police and prison service. Within this gloomy scenario, the two most daunting prospects for the people of Zimbabwe in 2004 are more severe food shortages than hitherto experienced and the rate of inflation rising to 1,000% pa and beyond.
On food, the fact that only limited quantities of seed and other inputs were available at the start of the 2003/2004 means that even if the rains are more favourable during the rest of the season than they’ve been in November, there is no possibility of maize production being more than 1,2 million tonnes. In relation to a 2 million tonne annual requirement, this is level of production would imply a shortage of 800 000 tonnes. With lower production being likely, the shortage may well be even larger.
The government’s denial about the adverse impact of the fast track land reform programme on agricultural production and its unwarranted antagonism towards the international community, has resulted in a situation where donor supplied food will be far short of the requirements to fill the gap. As long as the incumbent government clings onto power, it will continue to manipulate the distribution of food for political ends, making worse the underlying shortages.
In respect of inflation, the fecklessness of the government is evident from the Budget Statement irresponsibly avoiding making any statement on the government’s macro-economic policy stance. The monetary policy statement which is supposedly to be made by the Reserve Bank Governor by mid-December, was left to deal with the crucial issues of the exchange rate, interest rate policy and inflation.
There is every indication, however, that there will be little if any change in the main elements of the government’s present macro-economic policy stance (negative real interest rates, fragmented credit markets and distorted controls over the foreign currency market, both encouraging speculation and arbitrage, plus a large fiscal deficit). Under these policies, inflation, which accelerated from around 200% to a projected 600% of more by the end of 2003, will rise to 1,000% early in the new year and will continue accelerating thereafter throughout 2004.
The flouting of the requirements of responsible government evident in its economic policies are reason enough for the incumbent government to be considered a rogue regime. Although there are a few dissenting noises on the government side, there will be no shift from the Zanu-PF side that is fundamental enough to begin to address the severity of the crisis into which they have plunged the country.
It is only the MDC which has the will and the vision to begin the difficult task of reversing this catastrophe. The MDC’s economic blueprint, RESTART, stands for reconstruction, stabilisation, recovery and transformation. RESTART has been designed to tackle the deep economic crisis through a comprehensive five year programme of fully co-ordinated fiscal, monetary, exchange rate, sectoral and trade policies. RESTART will launch the MDC’s industrialisation strategy, through which the economy will provide rapid growth in high income urban employment and, with complementary policies, ensure a sustainable, equitable pattern of national development.
Every day that the present government continues to destroy the economy moves the starting point for RESTART further back. The sooner MDC assumes power, the sooner we can start addressing the crisis, moving the country forward again and bringing hope to the people of Zimbabwe.
Message to the people of Zimbabwe from MDC President
Morgan Tsvangirai.
Harare, Zimbabwe.
5th December
2003.
As each year
passes, we wonder if things can get worse.
We have
struggled together for our rights and freedoms for the past five years. We have
made tremendous gains in the process, taking charge of half the elected seats in
Parliament. We run the major towns and cities, home to about six million
people.
Despite the
impressive gains, the national question still remains unanswered; the national
agenda remains unfulfilled. The Zimbabwe crisis is deepening. Prospects for
democracy, freedom, justice and a better life for all seem to be fading as each
day passes.
We cannot allow
this regime to impose its false supremacy over the people. In March and in June,
we demonstrated beyond any reasonable doubt that Zimbabweans are capable of
reclaiming their sovereignty, assert their place and regain the voice.
Our efforts were
directed at getting Zanu PF to the negotiating table. Together with other
measures, we spent much of 2003 working to find an amicable solution to the
national crisis.
At the same
time, we reviewed and refined our policies and programmes. Shortly, we will
engage in discussions and debates with our own structures and our allies in
civil society to ensure that our policies enjoy widespread support and are
understood by the people.
The process will culminate
in the publication of these guidelines after our national conference at the end
of December.
There has been much
speculation about “talks” this year. For the record, no formal talks ever took
place. There are no talks. No agreement, ready for signature, is in sight.
We did all we
could to break the impasse. The effort was unfortunately spurned by Zanu PF and
nothing came out of it.
The churches
tried but failed.
Our neighbours,
Presidents Bakili Muluzi of Malawi and Thabo Mbeki of South Africa, also tried
and failed.
Informal or proximity
contacts between Secretary General Welshman Ncube and Patrick Chinamasa of Zanu
PF failed to yield any basis upon which to resume serious and formal dialogue.
The claim in some quarters
that there is a document of the proceedings of those informal contacts that
represents formally agreed positions and therefore ready for signature is,
therefore, regrettably false.
We remain
committed to using every peaceful means available to restore sanity to our
nation through unconditional dialogue.
The political
stalemate must be broken. We look forward to the Commonwealth and other
international organizations to assist us in breaking the
impasse.
However, over the past
year, it became clear that Zanu PF would not voluntarily opt for this
constructive course of action without the involvement of a brokering neutral
third party that commands both local and international confidence. It is
precisely in this area that the Commonwealth can apply its mind and come out
with a workable formula.
We believe the Commonwealth
could put in place a Task Force or Group of Eminent Commonwealth persons with
the full backing of the international community to immediately depart for
Zimbabwe to facilitate a process that would form the basis of the resumption of
formal talks.
We are convinced such a
programme would cool down political tempers, reduce the level of political
polarization and establish proximity bridges between the two political
parties.
Although the
country has been in the throes of political instability for the past three
years, we fear that the new levels of poverty and hunger, which mutate everyday,
are reducing the population to desperate and dangerous levels of hopelessness.
We have chosen
the path back to legitimacy that uses the mechanisms of the rule of law and the
application of open, transparent democratic principles.
We will take
over power by democratic means. Not through violence. This is a choice we have
made. That road may be tough, less spectacular and more arduous, but we remain
convinced it is the best way forward for us all.
The end result
will strengthen democracy and the rule of law in Africa and lay the foundations
for rapid recovery and reconstruction in Zimbabwe.
As the political
stalemate persists, we are assessing our options with a view to unveil a
detailed programme of rolling mass action in 2004. The suffering majority is
ready for such action.
Next year must
see us cross the bridge.
On behalf of the
MDC and myself, I want to thank all of you for your help and support during the
past year, this was not an easy year for any of us and next year will be just as
tough.
Morgan
Tsvangirai
President,
MDC.
From ZWNEWS, 5 December
The cost of speaking out
Zimbabwean Archbishop Pius Ncube, hailed internationally for his courage in speaking out against the abuses committed by Robert Mugabe’s regime, disclosed in a recent BBC interview that the authorities offered him a farm in an attempt to keep him quiet. "I refused because they wanted to silence me...I will not allow myself to be muzzled," said the Roman Catholic Archbishop of Bulawayo, interviewed for the BBC programme The Choice during a visit to Rome. Ncube described the harassment: the stalking by Mugabe’s dreaded intelligence agents; the death threats; the smears in the state-controlled press – including saying he fathered children by a nun; how a young woman who testified in the Bulawayo Cathedral to atrocities by Mugabe’s militia was smuggled out dressed as a nun to escape state agents. He vowed he will never give up.
"The trouble is that Mugabe and them are liars. They don’t want the truth to be known. Life has become impossible in Zimbabwe, even for the middle classes," said the archbishop. "To me it is a sin not to speak out when people are suffering. I have trust in God, that is what the faith is about," he added. "So while I cannot guarantee my own safety, if He wants me to serve him I think He will see to it that he protects me...I cannot be quiet just to preserve my own life." Speaking quietly, the 57-year-old prelate estimated that last year 5,000 people died from starvation, while the regime gave the United Nations falsely inflated harvest targets. "The U.N. then withdrew some of their aid. But they (the regime) were forecasting so it would appear the land reform is working very well." He put unemployment at 80 percent and described the state estimate of 500 percent inflation as "absolute lies – it is 1,000 percent right now." In solemn tones, Nucbe referred to the luxurious lives of Mugabe and others well-connnected with the Zanu PF party. "They are living in luxury while people are starving. Your heart is simply broken and you feel powerless."
Nucbe said at first there was little reaction from the regime when he spoke out strongly during the current crisis after the murder by a gang of Mugabe supporters in April 2000 of a farmer not far from Bulawayo. "To me he becomes evil when the person risks the lives of the people for his own personal power. So when he started sending out these war veterans to actually kill people...I began to feel these people are not simply going after land, they have evil intention for keeping their power status," said Ncube of the violent seizure of most white-owned farms. "I didn’t like the way they did it," he added in an apparent reference to the murder of white farmer Martin Olds. "There were something like 100 war veterans and they shot one farmer. For me, first of all it was cowardly and, secondly, it was evil. They could have taken over that farm in a peaceful way...I brought together my priests and told them I am taking a stand now."
Apart from support from other church leaders in Bulawayo, Ncube has been a lone voice for much of the crisis. The most senior Catholic prelate in Zimbabwe, Archbishop Patrick Chakaipa, was until his death in April a longtime apologist for Mugabe. The Anglican Bishop of Harare, Nolbert Kunonga, goes further. He is a fanatical Mugabe supporter and recipient of a farm. "I don’t know, I don’t understand it," the archbishop said when asked about Kunonga. Of his fellow Catholic prelates, Ncube said only, "Everyone was really nervous in the Catholic Church about my speaking out...a number of my fellow bishops felt I had to be much more prudent and much more careful in my choice of words."