via Disempowerment of blacks by blacks (Part1) 11/05/2014 by Ken Yamamoto NewZimbabwe
When an entire generation’s future is mortgaged!
IT would be really amusing were it not so serious. Zimbabwe is a country that is rapidly ‘going bananas’ and is on a slippery slope economically so much that millions of people are severely disempowered. And guess what, there is nothing more shocking than having the people who are supposed to be protecting you disempowering you, year after year, decade after decade, and that’s the sense I get from all the Zimbabweans I talk to.
“We are confronted with an economy which is heavily indebted, that is a reality I am facing, whether it is China or Malawi or the Bretton Wood Institutions (IMF and World Bank)… We must be cognisant of the fact that the country needs foreign direct investment. So, we must come up with policies to attract FDI”. I almost fell off my chair, when I read this in the online version of the Herald, which carried the story on 14 April 2014 (http://www.herald.co.zw/debt-overhang-deters-funding-as-govt-plots-strategies-to-attract-investors). These remarks, you won’t believe, were made by Zimbabwe’s finance Minister, Patrick Chinamasa, at a business conference at a Trade Fair in the southern city of Bulawayo. Surprise surprise!
Chinamasa has not been in his job for more than a year, but so far his takeaway lesson is that that Ministry is a proper university of hard knocks. When you lead that Ministry, you are faced with digits, or numbers: hard cold facts that hammer your face back to reality. In that job, playing to the gallery, political rhetoric, rigging or propaganda worketh not because after engaging in it, you still have to pay the bills. Commenting on the same issue, as reported on newzimbabwe.com (www.newzimbabwe.com/news-15412-Govt+working+on+debt+solution+Chinamasa/news.aspx), Chinamasa said, “To be honest with you, I’m grappling with the cause of the liquidity problem in the economy. Is it a political issue or an economic issue?”
Every rational being knows that Zimbabwe is on cruise control, and there is no firm hand in control. In fact it’s worse given that those that are purportedly in power have no clue how to fix the grave challenges afflicting this tiny economy.
There is no more powerful mafia than one that holds the reins of power in a sovereign country. Italy faced that challenge when Berlusconi was in power. This is the way I decode the situation in Zimbabwe. Robert Mugabe, his wife, his appointees in cabinet, the military, judiciary, central bank and a band of hangers on (hereinafter shortened Mugabe, Chinamasa & Associates) run Zimbabwe like it’s their mother’s kiosk, much like the Sicilian mafia. Zimbabweans I talk to from time to time refer to it as a junta.
But then when you run a country that way, it only goes one way – down! Why? Because a country goes nowhere if one person feels and goes all the way to his deathbed thinking he has a monopoly over ideas. For this very simple reason, even China, in spite of its one party policy, changes leaders every ten years, which is why just recently, Hu Jintao passed on the baton to Xi Jinping as President and Wen Jiabao passed on the baton to Li Keqiang as Premier. Jintao and Jiabao never held onto power using the excuse that Barack Obama is threatening China with his pivot to Asia plan the same way Mugabe trudges on at 90 under the guise that he has unfinished business.
I have figured over the years that the greatest weakness of African leaders is their inability to take responsibility for anything. They are never accountable to anyone, except their wives perhaps. This is the largest challenge afflicting Zimbabwe. Contrast this with the fact that Japan has had five prime ministers in between Shinzō Abe’s terms from the time he resigned in 2006 for low approval ratings and his comeback 2012. Once a leader realises that he has become a liability to the nation, or made mistakes that impinge on national progress and must not mortgage the nation on that account, he must bow out and resign.
Yet for the past decade, Mugabe, Chinamasa and Associates have been inventing excuse after excuse, attributing their failures to sanctions by Europe and the United States. According to their script, all of Zimbabwe’s problems are never because of their ineptitude. And the gullible have swallowed that hook line and sinker.
What Mugabe and Chinamasa, and their cohorts in government, especially the lot that has been with Mugabe since 1980, have not acknowledged to Zimbabweans is that they sold the nation cheap by borrowing non-stop from every lender who had the money to give. Unfortunately, they have nothing to show for all the borrowing and much of that money cannot be accounted for.
And seeing as those lenders cannot keep pouring their resources into the same bucket that’s leaking like a sieve, Mugabe and Chinamasa finds it convenient to tell gullible Zimbabweans that they cannot borrow because of sanctions. They cannot tell the truth that they borrowed from the same lenders and did not pay back. But then, as noted by author Mark Twain, a lie can travel half way around the world while the truth is putting its shoes on, and I shall come to that in a moment.
Many African leaders screw up their economies so badly over time, leaving themselves in such a fix that they have to borrow afterwards. Julius Nyerere did the same in Tanzania with his collectivisation program, leaving the country with massive starvation and vulnerable enough for the IMF and World Bank to step in with financial support. The trouble is if you negotiate while vulnerable, you negotiate from a point of weakness as you have no leverage whatsoever. Never negotiate when you are hungry! It seems many Africans have never mastered this simple fact. And Zimbabwe has for decades found itself in this kind of fix.
My friends and I have economic debates, when we review several moot points on economics and politics, and we sometimes look at African economies. We have debated the question, do economies collapse? I have argued that economies do not collapse. Rather, they fade away into oblivion like old soldiers. To buttress my argument, I have used the example of Somalia. Despite that the Zimbabwean economy will not die, under Mugabe, it has faded away like an old soldier, just like its present captain.
Zimbabwe has continuously been a on a decline for decades way before the year 2000. As a matter of fact, Zimbabwe accepted the structural adjustment program prescription from the IMF because of poor economic performance that started way in the mid-80s. By the end of the 80s, the structural elements of Zimbabwe’s economy were faltering, corruption under Mugabe was becoming endemic and unemployment was becoming a national problem. For example, in 1988, Mugabe formed a cabinet after the unity agreement with ZAPU in which Dzingai Mutumbuka’s ministry portfolio was reduced to Minister of higher education, and the American Embassy in that year, in a publicly available cable explained this issue as follows:
“Since 1980 Mutumbuka has been responsible for the government’s policy of mass education which each year turns out increasingly large numbers of “school leavers” who expect white collar employment or positions in the university. Because the university can only admit a small number of the school leavers each year, and job creation outside of the civil service has been virtually nil, the pool of Zimbabwe’s unemployed young people is growing rapidly and the GOZ is now very concerned about the political and social implications of such an unemployment problem. It may be therefore that Mugabe blames Mutumbuka for this “school leavers” crisis and has punished him by taking away responsibility for primary and secondary education.”
But bad decisions have been made by the Zimbabwean leadership year after year, decade after decade, causing the widespread disempowerment of the black people.
While visiting a lecturer at the University of Zimbabwe in 2012, I instinctively pulled a book off a shelf. The book, called Zimbabwe 1993 – one of those books that reviews the economy each year – had a chapter that looked at the country’s economic performance in 1993, touching on the objectives and problems the economy encountered. Some of the objectives included; ‘encouraging new local and foreign investment to promote economic development’, ‘promote the development, transfer and adaptation of technology’, and ‘to promote regional and international cooperation to enhance industrialisation’. The problems were adequately enunciated. I took a picture of that page with my phone, and they were as follows:
“Problems encountered included the manufacturing sector’s geographical concentration of industrial firms in Harare and Bulawayo, the overdependence of the sector on imported inputs, plant, machinery, equipment and raw materials; obsolete capital stock; under capacity utilisation, shortage of skilled manpower and the highly publicised shortage of foreign currency.
It’s extremely ironic that these problems ably captured way back in 1993 have never been solved under Mugabe’s leadership. If you take stock of Zimbabwe today, it suffers the same problems, the difference being that each of the problems has become so much a chronic cancer that Mugabe himself will die without fixing, and may take generations to fix. While Mugabe blames everybody else except himself and his cohorts in government and the military: today, there are no more industrial firms in Harare and Bulawayo, (not even a matches manufacturer – Zimbabwe’s matches and toothpicks are made in China and South Africa); Zimbabwe now rarely imports inputs, plant, machinery and raw materials at it did in 1993, it imports virtually everything from underwear to chewing gum); there is no more capital stock to call obsolete; skilled manpower has become an endangered species; and finally while foreign currency is no longer in shortage, it has become the de facto local currency and the Zimbabwe dollar received its obituary five years ago. The country’s cancer of economic decay has become malignant and extremely hard to reverse.
Mugabe has made terrible mistakes over the years, some of them terrible enough to deserve jail time. I have visited Zimbabwe many times and I have observed its progressive decline under his leadership. Ironically, when I first visited Zimbabwe in 1998 as a postgraduate student, Mugabe, without the approval of parliament, had sent troops into the DRC to prop up Laurent Desire Kabila whose position was threatened. The sojourn turned to be an exorbitant four year venture with no dividends. It was so foolish a venture that while other countries would partake in such expeditions, it would only be done in the pursuit of a strategic foreign policy. The war cost Zimbabwe hundreds millions of dollars for nothing – zilch! Mugabe went there with no national plan whatsoever, smart as he is claimed to be.
Do not be fooled, no national leader with anything between his ears simply goes into a foreign war without nationally strategic interests simply to protect the ‘territorial integrity’ of another. Only foolish leaders do that. Ironically, soon after Mugabe’s mindless expedition in the Congo, hundreds of South African firms have signed lucrative deals and partnerships in that country at no cost to their economic wellbeing. Companies like Pretoria Portland Cement have concluded huge cement joint ventures, and the SA government has signed agreements over the Inga 3 Dam project to build power plants. And what was Zimbabwe’s strategic interest? Nothing – beyond personal selfish enrichment here and there.
Prior to the expensive but ill-fated DRC military excursion, Mugabe had disbursed an unbudgeted $50,000 per individual to veterans of the liberation war in 1997. Their demands were beginning to threaten Mugabe’s position, and had been exacerbated by the fact that Mugabe’s cronies, including the current Vice President, Joice Mujuru, and perennially fleeced the War Victims Compensation fund, claiming various levels of disability. This move precipitated an irreversible gradual pace of economic decline in Zimbabwe, which together with several subsequent strategic errors by the leadership led to the severe long term disempowerment of citizens.
The two foregoing examples are just but two instances showing how the people applauded a mad man who was actually running away with their beef from the barbeque. But the matter that actually takes the cup in disempowering generations of Zimbabweans way beyond the current crop of leaders, something that future leaders will have their heads cracking about, is the national debt.
Zimbabwe, when you compare its national output to what it owes, is technically insolvent. It owes Bretton Woods institutions and multi-lateral bodies over $2,5 billion, the Paris Club $3,8 billion and other creditors $682 million. Chinamasa has in the last few months sought to make claims that Zimbabwe’s debt is not as huge, at $7 billion, as the media wants to portray at $11 billion. That is neither here nor there. The fact is Zimbabwe’s foreign debt is at the very least at 200% the size of its national budget. There is even no point in comparing this debt to GDP, because debt is not paid from GDP, but from revenues.
But then, in his attempt to make people believe that Zimbabwe’s debt is huge at $7 billion, but not as huge as portrayed by the media, Chinamasa wants people to think Zimbabwe owes the Bretton Woods Institutions and Paris Club only. The fact is, Zimbabwe owes several other countries, including its poor neighbours. For example, Zimbabwe in the last three years alone borrowed roughly $1,5 billion dollars from China – which debt includes $100 million to build a national defence college which was built with virtually everything including nails and screws from China.
Zimbabwe also owes Zambia at least $71 million, for things like grain, but much of it for the shared cost of the Kariba Dam construction and associated infrastructure, including the sale of assets belonging to the Central African Power Corporation (CAPCO), a power firm jointly owned by the two countries when they were still part of the Federation of Rhodesia and Nyasaland, which was dissolved in 1963. CAPCO was running the Kariba power project for the two countries but was disbanded in 1987 and Mugabe and company have not paid their dues. Zimbabwe also owe(d) Malawi millions of dollars for grain supplied during Bingu waMutharika’s time.
Not only does Zimbabwe owe foreigners. It also owes its own people. Up to the time the Zimbabwe dollar was choked to death by the people responsible for managing it, the government’s domestic borrowings were huge, funding much of its budget from borrowing and printing money. That means Zimbabwe owes its citizens more billions. If you add together the billions of foreign debt, and the billions of domestic debt, clearly, the future of a whole generation of Zimbabweans has been mortgaged. But that is not even the juicy part. The juicy part is that Mugabe, Chinamasa & Associates are in so much of a fix and they have over the last 34 years tied themselves in so many knots and borrowed the entire nation up to its neck that Zimbabwe is no longer credit worthy.
So what’s their grand plan to get out of this mess to fund ZIMASSET? Their answer is securitisation of minerals. If this strategy worked, the DRC would be the richest place today, but that is a matter for another day. The net effect of the strategy of Mugabe, Chinamasa & Associates is that, in the unlikely event that it works, Zimbabweans today and Zimbabweans in future will be indentured and indebted to China for decades to come. Every drop of your sweat and ounce of your energy will be used to pay off those debts for decades to come. An entire generation will be a disempowered generation.
Having said the foregoing, the debt issue is not what boggles the mind. What is mind-boggling if not mind-blowing is where all these borrowed billions went to. Much of Zimbabwe’s infrastructure was built by colonialists. The major highways major hospitals, major cities, major bridges, the best schools, major government buildings, museums, national parks, major dams/lakes, railroads and major airports among other key infrastructure in Zimbabwe were built by the white settler administration. It’s hard to trace any of the billions that Mugabe, Chinamasa and Associates borrowed to key infrastructure, especially given that when you borrow billions, you should use that for capital purposes.
So if there is not much to show for the billions, where did the money go? This question becomes pertinent especially seeing as Zimbabwe had for decades received donor funding year after year. For example, for many years, Zimbabwe’s district development fund was funded by a technical partner, GTZ – German’s international cooperation agency. In spite of that, Mugabe’s senior officials, including Mai Mujuru and businessman Roger Boka among others, abused the fund by getting boreholes drilled at their farms, suburban residencies and rural areas.
So what is the long and short of all this? To sum up, Zimbabwe’s present and future generations have had their future mortgaged and tied up in debt. Sadly, that debt has a devastating effect as it is an albatross around the potential of the country. It’s hard, going forward, to develop as the country must work to pay off those debts. It also means that the sweat of the productive few has to go towards settling that debt and hardly towards development.
Mugabe is one of the few constants in Zimbabwe’s government since 1980. Since he took over the reins, Zimbabwe has been borrowing without end. Mugabe is said to have many degrees, including an economics one, which I believe he earned while studying in jail, a feat which was possible under the colonialist government. Prisoners in Zimbabwe today can hardly read a book. Nonetheless, I checked all the approaches to economics: classical, Keynesian, neo-classical among others and I have not found one that could have persuaded Mugabe to think and believe that government can borrow without end. I did so because a professor friend in Zimbabwe brought my attention to old newspaper report in the early 90s. At that time, Mugabe had just returned from a one of his regular foreign trips and he remarked that there was no limit to government borrowing. “Government can borrow as much as much as it wants”, he said.
Mugabe, further believed, very strangely for that matter, that governments do not get broke. This may have been inspired by his tax-and-spend habits. Little did he make the connection between borrowing externally and internally, crowding out of the private sector, effect on national crown jewels and how it destroys the very private formal sector which you tax, massive unemployment, the gradual destruction of the formal sector, massive disempowerment of citizens and the wholesale transformation of the economy into informal trading characterised by street vending, medieval cottage industries, mobile phone recharge cards hawking, drug peddling and flea markets. This creates a negative spiral where if your penchant was taxing-and-spending, you get stuck in a rut because only a fool can ever think they can tax the informal sector because informal traders are just that. In any case, Mugabe’s warped economic mind has left Zimbabwe in an extremely undesirable situation where the two largest companies are a mobile phone operator and a beer-and-drink bottler – which are both consumptive industries.
Making Zimbabwe a colony again
They love to say ‘Zimbabwe will never be a colony again’. That makes for nice slogans at political rallies but the reality is far from it. Sadly, Zimbabwe will be a ‘mortgaged colony’ sold cheap for several decades. The only question is just who will be modern day coloniser. Gentlemen and ladies of Zimbabwe, you have come full circle. Mugabe wants billions of cash to finance ZimAsset, a very flawed economic program whose efficacy will be a matter for another day. But as I noted earlier, this is further mortgaging of present and future generations’ future and potential.
Mugabe, Chinamasa and Associates want to securitise the country’s resources to get the billions they need. Let’s unmask this concept for a moment so that there is no confusion over what it means. It simply means a lender (say China) advances money to a borrower (Zimbabwe) in the hope that he will pay back when he gets cash flows from the sales of minerals. It also means all future cash flows from Zimbabwe’s sale of minerals will be paid to the lender (say China) and the lender would certainly want those proceeds in an escrow account far from the marauding politicians. Clever readers can actually begin to see why the securitisation strategy is risky and why it will hardly find takers, but I shall look at that in detail in a future article.
What is almost clear for now is that the Chinese are not very excited about Zimbabwe. Currently on his African safari, Prime Minister Li Keqiang is ducking Zimbabwe and visiting Ethiopia, Kenya, Nigeria and Angola, countries that have better prospects for China. Xi Jinping, China’s president visited Tanzania, South Africa and Congo Brazzaville last year, and avoided Zimbabwe. Several other leaders before them avoided Zimbabwe.
This is not because Zimbabwe is under sanctions from China. It’s because Zimbabwe is not strategic and is way too small for China’s diary. It is also because Zimbabwe is too indebted to global lenders to render its economic resuscitation a priority to China. In any case, imagine Li Keqiang (58) negotiating a deal worth billions with Mugabe (90), it does not inspire confidence at all on the part of the lender. You might argue that Mugabe himself will not be a negotiator, but the Chinese very well know that Mugabe personalises Zimbabwe and calls it “my Zimbabwe”.
Zimbabwe’s significant problems cannot be solved at the same level of thinking Zimbabweans were at when they created them. In the same vein, Zimbabwe’s problems shall not be solved by the same people that created them. While young Zimbabweans are certainly disempowered and working from below the number line, there is scope to rise out of the ashes. Japan did so. South Korea did so. Singapore did so. But it requires honest leaders with an extremely high level of prudence and work ethic.
The Japanese have a saying – “takara no mocha-kusare. This means “a treasure decaying in one’s hands”, meaning that a person who has resources has a responsibility to put them to good use, else they rot away. Zimbabweans are severely disempowered today and it’s of their own making, even though some of them don’t see it. It’s also entirely in their hands to re-empower themselves, but it requires proper game-changers.
Ken Yamamoto is a researcher on Africa at an Institute in Tokyo. He researches and travels frequently in Uganda, Kenya and Zimbabwe. You can contact Ken on firstname.lastname@example.org