Zimbabweans opting out of the system

via Withdrawal symptoms: Zimbabweans opting out of the system – DailyNews Live 2 JANUARY 2014 by Francis Harawa 

Zimbabweans started withdrawing from the economy long before it collapsed.

There was a lot of “wheeling and dealing” (madhiri) in offices and other places in the late 1980s and early 90s as  foreign exchange shortages began to bite and those who could source it bought machinery spares for companies, making a killing.

As incomes shrunk during the period of the Economic Structural Adjustment Programme (Esap), many discovered they could operate outside the formal economy and do even better — government did not have the capacity to monitor their incomes and therefore tax them.

In 1989, the late Sungura maestro Leornard Dembo released the hit song Shamwari yangu warova (Where have you been my friend?), The answer: “I was busy wheeling and dealing.” The record sold over 100 000 copies and became a must song at weddings.

Many may not have fully digested the gist of Dembo’s message but it typified the time and continues to do so.

Zimbabweans began operating outside the system  because the State was failing to meet its obligations to citizens — first and foremost, providing employment, housing, affordable food and other social amenities — health  services, medicines, water and electricity.

The shortage of water spawned a well digging and borehole sinking frenzy for those who could afford, and power blackouts have led to a flourishing power generator sales boom, with hundreds of thousands of households turning to gas. They have been disengaging from the system.

The cross border trade with Zambia, Malawi, Tanzania and neighbours Botswana and South Africa, created a class of people who made money by avoiding duty and tax, while doubling or tripling profits — a mentality some economics says continues to haunt pricing in the country.

In addition, Zimbabweans have kept Tobias Mudede, the Registrar-General busy issuing passports year in and year out because they consider the travel document as good as a job. With a small start-up capital, one can cross the border and bring some trinkets for sale. No wonder some economists have said Zimbabwe is now a nation of traders — everyone is trying to sell something to somebody.

Company closures after 2000 created “home industries” where the skilled who did not want to look for greener pastures outside the country, started making furniture, window and door frames, shoes, you name it, by the road side. Again the earnings were not visible to government.

As shortages of commodities and foodstuffs persisted, people opened tuck shops at their homes to supplemented family incomes.

This was not limited to ordinary citizens, ministers were accused of commandeering basic commodities like sugar and cooking oil and the staple maize meal, maximising their profits as they were the only ones with the commodities.

Some top officials even had warehouses filled to the rafters with commodities that were in short supply.

In its 2002 presidential manifesto, Zanu PF promised to create 500 000 jobs, yet by 2005, the economy was losing thousands of jobs as industry failed to source forex for raw materials, sending more Zimbabweans onto the unemployment queues and many more into the diaspora.

Those who migrated later saved family members left behind, sending hard earned forex which “Gono’s boys” gobbled up.

At one stage, wealth was measured by the number of sons or daughters one had in the UK.

Those who had honest relatives bought numerous properties but for others, it was “Nhava izere mhepo” (a wasted effort), according to the Katekwe  composer Oliver Mutukudzi.

Flea markets sprouted in the city overnight, with most of the car parks filled with goods from neighboring countries.

The markets also doubled as bureaux de change.

During Murambatsvina, hot on the heels of the 2005 general elections, some people said flea markets had been targeted to flush out the forex in the streets because Gono wanted it. The streets were later awash with “boys” who traded in forex, offering the best rates. They were conveniently well connected.

In the high density suburbs,  people built shacks which they also rented out to make ends meet. This overburdened the sewerage and water systems built before independence for a limited population which was strictly monitored under the colonial government. Rentals  went into the pockets of the landlords. City Councils and the government didn’t benefit.

Government was accused of demolishing unplanned structures behind people’s residences which “haboured” the many people who voted against Zanu PF in the 2005 polls. The opposition MDC had won 47 seats most in urban centres.

Zimbabwe government began printing money in 1997 to pay restive war veterans who were reeling from the effects of Esap. The dollar lost over fifty percent of its value overnight. When Gono became governor in 2003, the printing presses never stopped as he implemented his quasi-fiscal policies, driving the inflation rate to a record 230m percent.

The Zanu PF  government said the shortages of notes was variously caused by forex dealers who spirited away the notes for trading at border posts.

The truth was that at the rate at which inflation was  growing, it was impossible to print money to meet demand.  At some stage banks bought money from people who generated mounds of daily cash.

But perhaps the biggest damage to Zimbabweans during the hyper-inflationary era was  the destruction of their confidence in the banking system.

Hundreds of thousands of Zimbabweans lost their money when banks and financial institutions started collapsing in 2006 when Gono pounced on banks, and money transfer agencies canceling licences of those that were skirting the laws.

After the bank closures, the central bank imposed cash withdrawal limits that saw people queueing for amounts that were barely enough to pay for fares to get back home. This prompted people to open numerous bank accounts in attempts to beat the system.

I remember in one month when I was on leave, I went to the bank every day of the week.

When month end came, I was told there was no money in my account, charges for the daily withdrawals had wiped out my salary.

When dollarisation was introduced in 2009, Zimbabweans had rejected “Gono’s money” the 100 trillion dollar note could not be used in combis and shops. The Zim dollar then froze at One US dollar to Z$64 trillion.

Then came the earth-shattering event,  people woke up one morning to find their bank balances had been reduced to naught — years of savings, insurance policies, retirement packages and all. That did it. Zimbabweans lost their confidence in the banking system — completely.

After dollarisation, Zimbabweans nursing scars from the hyper-inflationary era, shied away from banks.

They preferred to keep their money “under mattresses.” The result: over $2 billion circulating outside banks and a paucity of savings to be used for borrowing.

With the informal sector employing 3,5 million, Zimbabweans have decided to do it for themselves.

But the money will continue to circulate outside banks, worsened by the fact that  indigenous banks have begun collapsing again. A number are failing to meet daily cash withdrawals.

One has already been closed, others are teetering on the brink of collapse.

When Zannu PF won the July 31 polls, people made a run on the banks and withdrew of billion of dollars.

In its election manifesto this year, Zanu PF promised to create 2,2 million jobs.

A recent  Confederation of Zimbabwe Industries survey shows over 900 companies have closed since 2009 and many more are reeling, throwing more people into the streets and strengthening the informal sector.

With the economy grinding to a halt, it is not surprising Chinamasa has no funds in his kitty.