Zimbabwe a ‘potential conflict zone’

via Zimbabwe a ‘potential conflict zone’ – The Zimbabwe Independent August 7, 2015

A LEADING research institute has added Zimbabwe to its potential conflict zone or flashpoints watch list as the country’s economic situation fast deteriorates amid unprecedented company closures and massive job losses which have seen almost 20 000 people retrenched and dismissed in a three-week wave of record cutbacks as firms struggle to survive.

Taurai Mangudhla

This crisis, coupled with government’s fight against armies of vendors who have invaded streets of towns and cities after losing their jobs as they battle for survival, has created an explosive environment of economic and social instability in which riots, an uprising or violence could flare up even though Zimbabweans are known for their docility.

World leader in global forecasting and quantitative analysis for business and government, Oxford Economics’ risk assessment firm NKC African Economics (NKC) recently added Zimbabwe to a list of unstable countries which include Burkina Faso, Ethiopia, Guinea-Bissau, Kenya, Madagascar, Mauritania, Swaziland, Togo, Tunisia and the Western Sahara.

NKC says it has taken into account recent economic and social developments in Zimbabwe, including government’s ongoing battle with vendors which have created a volatile situation. Authorities are fighting vendors to stop hawking in undesignated areas.

The situation has also been fuelled by the current record job losses following a controversial Supreme Court ruling which confirmed employers have a right to retrench employees on three months’ notices without paying retrenchment packages.

The South Africa-based NKC African Economics, owned by Britain’s Oxford Economics, investigates and interprets sovereign risk, and political and macroeconomic conditions of 30 African countries to caution against pitfalls and guide investors towards opportunities.

The recent Supreme Court ruling has led to a bloodbath of job cuts with almost 20 000 workers have been thrown away in three weeks.

Government, the country’s biggest formal sector employer, has hinted on cutting its wage bill from above 80% of the revenues to below 40%, raising fear of another wave of job cuts given that some state-owned enterprises have already laid off significant numbers of workers.

Even though government seems afraid to retrench for political reasons, this might soon become inevitable given its inexorably dwindling revenues as the tax base shrinks.

In a report titled Zimbabwe — One of these straws will be the overloaded camel’s last, NKC says in view of the fact that government revenues are “not about to rocket upwards”, authorities might be forced cut wages or retrench, throwing away more people onto the streets, while fuelling social discontent and instability.

NKC says Zimbabweans’ patience and resilience could be wearing thin as a result of mounting socio-economic pressures stemming from government’s governance and policy failures.

“We remain reluctant to make short-term predictions that ‘the political end is nigh’ for Zanu PF and (President Robert) Mugabe given the regime’s extraordinary ability to survive against ever mounting odds, but we also believe that the equally extraordinary patience and resilience of the Zimbabwe people is wearing thin,” NKC says.

“What is different about the pressures building this time is that we are approaching the point where the moribund economy and regime excesses are putting more and more people on the street with no prospects of returning to employment any time soon, and then denying them even the opportunity to scrape out a meagre day-to-day subsistence existence. One of these straws, one of these days, and the back of the camel will break.”

NKC says Zimbabwe’s main risk factors remain its political situation and constrained liquidity within the multi-currency system, which will keep economic growth below potential and pressure the government’s ability to raise enough tax revenues. The country’s long-term investment prospects remain relatively high based on its natural resource wealth.

However, a leadership purge in Zanu PF driven by succession battles has sidelined the more moderate elements in the party and empowered the more confrontational hardline factions, it says.