Has Zimbabwe’s economy collapsed already?

Zimbabwe’s President, Robert Mugabe, once famously remarked that no country can ever get broke. Since 1997, when the first pangs of economic decline were felt in that once richly endowed country, the President appears to have made proving the veracity of that statement his sole mission in life. There is no country, in living memory, whose economy has deteriorated to an extent similar to that of Zimbabwe.

Inflation is now officially hovering around 100,000% (and unofficially, probably twice or three time that figure), the Zimbabwe dollar (ZW$) is trading on the black market at 25 million to one United States dollar (US$), the store shelves are all but empty, there is no food to feed the people and the country is now heavily reliant on food donations.

Everything else is pointing the wrong way. Unemployment levels have reached more than eighty percent, manufacturing capacity is less than 30% and the citizens have fled to all corners of the earth to escape the misery and poverty which the collapsed economy has spouted. The massive emigration of qualified and skilled people has depleted the country of its human capital and this has undermined the country’s ability to provide adequate services and infrastructure to its people.

Electricity is no longer available and people are relying more on generators (for those with the means) and candles and firewood (for the vast majority of the citizens). The roads are deteriorating at an alarming pace and water has become scarce in most urban centres. Schools and hospitals are understaffed and under-equipped and the few professional teaching and medical staff remaining are constantly on strike for one cause or another. Yet in most accounts, the country is still described as “facing” economic collapse. “Facing collapse” implies that the collapse is possible, probable or imminent but it does not reflect a fait accompli – that the economy has actually collapsed.

To all intents and purposes and other than for semantic arguments, the economy in Zimbabwe has collapsed. Take the inflation figure, for a start. A six figure inflation rate means that, at the very least, the purchasing power of Zimbabweans is being eroded by at least 270% each day. Or to put it differently, the people’s income is expected to increase by about three times each day to retain its purchasing parity. Yet, only four years ago the inflation rate was about 600% (which was quite bad, mind you!) which means that inflation has risen by more than 160 times in the short four year period. Can any economist somewhere out there tell me how a country in which the value of its cash assets are depleting more that three times daily, can be described as “facing collapse”?

Turning to the value of the national currency, the Zimbabwe dollar was trading at around ZW$10 to a US$ in 1997. There was no black market then and anyone could walk into a bank, apply for and collect foreign currency without any difficulty. Now it is virtually impossible to obtain foreign currency from any official sources, unless one is well connected to the powers that be. So all the trade of foreign currency is taking place outside the official channels in what has been termed the parallel market (or somewhat inappropriately, the black market).

On the parallel market, the ZW$ is now trading at 25 million to a single US$. If you think that is bad, wait a moment. The currency was revaluated less than two years ago and three zeros were slashed from the face value of the currency. If you add those zeros back. It means that the currency is now trading at ZW$25 billion to a US$ (or 2,5billion times what it was worth ten years ago). I must confess that I am not brilliant with figures so I desperately hope that my calculations are wrong. If they are correct, the numbers are mind boggling in a sad sort of way, to say the least.

So given all this, one should really wonder at what stage will the country’s economy be declared officially collapsed? This issue is very important to establish because it determines the legality or otherwise of the actions and activities of those in power in at the moment. Everyone knows that it is crime to trade a company that is insolvent (generally defined as the situation where the value of assets is less than the value of liabilities). Directors of insolvent companies who fail to file for bankruptcy are liable for criminal prosecution. If one takes the argument that a country is actually one very large enterprise (which is probably true), it can be argued that the leaders of government (the directors) are liable for prosecution for running a country that is insolvent.

It is also a fact that under company law, persons who have filed for bankruptcy and have not been legally rehabilitated are barred from holding directorships of other businesses. By extension, this provision would disqualify all the present leadership in the country for running for office in the forthcoming elections. The principle of “existence for the general good of the public or society” which informs such laws and practices applies to governments as much as it does to private companies. There can be no exception to that. It is not good enough to blame sanctions or the opposition or, indeed, the British government for this poor state of the economy. Rhodesia, as Zimbabwe was known before independence, was under UN sanctions for a long time yet was able to run an efficient economy to serve the needs of its people. The same can be said of Cuba today.

Another problem that has been bothering me is why those in leadership do not realise the extent of the problem faced by their own people and their (leaders’) obligation to rectify the situation. I have developed a theory on this. Question: suppose you commit a crime, what do you do to protect yourself? Answer: you destroy the evidence. Thieves will wipe off their fingerprints from surfaces they may have touched, murderers will bury the bodies where they cannot be found and throw away or hide their weapons. Given this propensity for criminals to destroy or hide evidence, is it possible that the present destruction of Zimbabwe’s economy is a deliberate ploy or effort to destroy the evidence of massive looting of national resources by those who are ruling the country?

Let me put it this way, if billions of real “dollars” have been siphoned away to Switzerland or Malaysia, it would make sense to destroy the evidence by printing huge sums of worthless paper money. With all the re-denominations and re-evaluations of the currency taking place in the country, it will be difficult if not impossible to track and account for any embezzled funds. The evidence is disappearing before our very eyes and very soon there will be nothing to pin on the offenders and transgressors. That seems to me to be a real motivation for the leaders to sustain the present unacceptable state of affairs in Zimbabwe.

If it is indeed the case that evidence of criminality is being wilfully destroyed by the present leadership in the country, then those in power now will have even more to answer for when the moment of reckoning comes. I know it will be easy to say at that time that all this was a fault of one man, Robert Mugabe, but I suspect there will be more than enough evidence to show that this was not act of one but many persons – most of whom were willing participants and direct beneficiaries of the grand theft. This includes the politicians in the ruling elite, the officials of the reserve bank, the business community, senior civil servants, the judiciary and the law enforcement agents.

Many people will be called to account for their actions or inactions in the course of the unfolding economic collapse and many will be asked to explain how they acquired their immense wealth when everyone else was becoming poorer by the day. Many questions will be asked and even more answers sought on how and why the situation deteriorated to this extent. It may very well be that the forthcoming elections will not lead to this eventuality but, sure as day follows night and night follows day, the time will come for these questions to be asked. And when that time comes, the answers had better be good - very good indeed.

Simba Makoni – Zimbabwe’s saviour or Mugabe’s decoy?

In a country in which there has, for a long time, been very little or no good news, the announcement this week by the former Zimbabwean minister of finance, Dr Simba Makoni, that he will contest the upcoming elections as an independent was quite exhilarating. However it was hardly a surprise, after so much speculation in the preceding weeks that he would do so. If there was anyone who was surprised, it was probably the man with whom Dr Makoni will lock horns in the contest, President Robert Mugabe, who he had met in a private but much publicised tête-à-tête two weeks previously.

It is early days yet to decipher and clearly understand what strategy Makoni has to unseat the man who has been on the hot seat for 28 years - all of Zimbabwe’s life as an independent country. Many before him have tried and failed. The first real challenger to Mugabe’s power was Edgar “Two-boy” Tekere, the maverick politician who broke out of Zanu-PF famously declaring that, under Mugabe, democracy in the party and the country was in the intensive care unit. He formed the Zimbabwe Unity Movement and in 1990 contested the presidential elections which he lost to Mugabe. After many years of turmoil within his party and within his personal life, he rejoined Zanu-PF only to be expelled again after the publication of his best-selling biography which was somewhat unflattering to Mugabe’s leadership credentials.

The next serious challenger to Mugabe was Enoch Dumbutshena, the former chief justice of the country who led his new party, The Forum Party, in a contest against Mugabe in 1995 and, not unexpectedly, lost the competition. Justice Dumbutshena was a popular, humble and honourable man who could have been trusted to rule the country in a fair and just manner. But he was no much against Mugabe’s slick and well oiled election machinery and his failure to unseat Mugabe ensured that he would be consigned to the dustbin of history. After Dumbutshena came, we all now know, Morgan Tsvangirai, the astute and articulate former trade unionist who, with his colleagues cobbled up the Movement for Democratic Change (MDC) in 1999 which nearly won the 2000 parliamentary elections. The MDC was the first party since the country’s independence to give Zanu-PF a serious run for their money and there is widely held belief that the party won the contest but were rigged out of their victory. In the presidential elections in 2002, Tsvangirai went head to head with Mugabe in the presidential election and “lost”. (I place “lost” in parenthesis because the results were highly disputed and questionable.)

Without doubt Tsvangirai is a popular and savvy politician who could have as easily lead the country back to prosperity but, like many of us, he is not infallible. I suspect that he may have made some errors of judgement which allowed his party to be split into two factions. As a consequence and with Tsvangirai’s credentials under scrutiny, the MDC is likely to present a weak and fractured opposition to Mugabe in the forthcoming elections. The split opposition vote will allow Mugabe a reasonably clear run for re-election. Enter Simba Makoni. The one thing that is certain about politics is that it is a game of opportunism and there is indeed an opportunity for Makoni to make himself a national hero. With the MDC in near shambles, Makoni may present the electorate with the only credible and realistic option to unseat Mugabe.

Zimbabwe is a country which is yearning and desperate for change and the leadership trophy is there for the taking by anyone brave enough to stand up to Mugabe and present himself as a serious contender. Makoni comes in with a number of real advantages. He has the experience emanating from his tenure as a government minister and as the executive secretary of the Southern African Development Community. He is what one would call an “insider” who has been privy to the workings of national governance and international diplomacy. I would add that he is well connected to the national, regional and international “power grids” and could, if he won the election, move very quickly to restore Zimbabwe’s standing within the international community.

Makoni is clever and articulate (you do not earn a PhD by being dumb!) and can make a persuasive case to the electorate and to whoever cares to listen to him. He understands economics, having been a minister of finance. He has worked with youth organisations, as a former minister of youth and sports. His SADC experience has burnished his internationalist credentials. But most importantly, he has the endorsement of the man whom he seeks to replace. He was sacked as minister of finance by Mugabe and that is as a big an endorsement as one could ever get in the current scheme of things in Zimbabwe. The conventional wisdom in Zimbabwe is that in a free and fair election just about anyone can run and win against Mugabe. Makoni is certainly not just anyone.

Having made the case for Makoni’s participation in the forthcoming elections let me, for a moment, look at the downside of his mission. The first thing is that his entry is bound to raise a lot of suspicion in the minds of many about his motives and sincerity. The fact that he met with Mugabe in a private session a few weeks before his announcement raises the spectre that some kind of deal could have been cut. It is quite possible that Mugabe could have encouraged Makoni to run in order to split the opposition vote. Mugabe knows very well that the more opponents there are in the contest, the better his chances are of retaining power. Of course Mugabe would be taking the risk that the opposition could decide to coalesce around Makoni thus making him a real and potent challenger but I suspect that that is a risk a very desperate Mugabe would be prepared to take. I would also expect that if a deal was indeed cut, Mugabe would have ensured that there were adequate safeguards and guarantees to protect him.

The second disadvantage which Makoni will face will be the limited time left for him to put together an election machinery which will deliver to him the desired results. A period of less than two months is simply too short for anyone to launch a credible campaign in a national election. There is a possibility that a lot of homework may have been done before the announcement and that structures may already have been secretly put in place. But I doubt this very much. Mugabe has over the years strengthened his intelligence capacity and services to the extent that nothing big or serious is likely to happen within the country and his party without him getting to know about it. And when he does, he acts with ruthless efficiency to weed out the miscreants as Professor Jonathan Moyo and others involved in the abortive Tsholotsho saga will readily testify.

The MDC had barely seven months to organise and prepare for the 2000 parliamentary elections. But they were bringing with them a whole national trade union organisation. Apart from a few and as yet unknown disgruntled elements within Zanu PF, Makoni has no known such organisation and machinery and he wants to pull off a win in a presidential election with barely two months left on the calendar! That is a real tall order, even running against a widely unpopular and thoroughly discredited opponent like Mugabe. Makoni will have to work his socks off every hour and minute of the remaining days to the election and pray very hard for divine intervention if he is to make any mark on the plebiscite.

Finally, Makoni has not yet shown how and whether he can stand up to the Mugabe’s intimidation and disruption tactics. As an insider and having lived all his political life sheltered under the Zanu PF umbrella, he is most certainly untrained and inexperienced in fending off the poisonous arrows and barbed spears which will undoubtedly be spewed towards him by the massive Mugabe propaganda machinery. He may have shown that he has the balls to stand up to Mugabe, but can he sustain the challenge in the face of adversity? How he handles himself in the next two months will determine whether he will become a hero and saviour of the Zimbabwean people or whether he will be regarded as a decoy for yet another Mugabe grab for power.