December 24, 2007

VOICES AT CHRISTMAS

The black economic empowerment programme enriched a few ZANU (PF) ministers and their cronies and left millions out in the cold. Despite 27 years of independence, the wealth gap has not narrowed but grown wider. Zimbabweans yearn for a constitutional reform process which will usher lasting solutions to the prevailing political culture of intolerance, impunity, violence, fear, intimidation and uncertainty as to what the future holds.

Zimbabwe has been in economic freefall since 2000 when Robert Mugabe began his chaotic land reform. The policy has been a disaster, largely obliterating the farming sector of a nation once dubbed the "bread basket of southern Africa". No one disputes the need for land redistribution. But the contentious fast-track land reform programme captures and effectively represents the regime's poor grasp of economic fundamentals.

The most potent charge against the regime is that both the process and outcome of the land reform programme have shown the regime's failure to usefully and profitably manage a strategic economic resource. Land should be put to its most effective use in terms of productivity. The regime failed to put a proper plan to economically manage the seized commercial farms properly and effectively.

Zimbabwe's economic decline under ZANU (PF) rule is plain to see. Unemployment is at 85% and inflation at an estimated 14,840% as of October 2007. Thus, cash is used on a daily basis because of the effects of the hyper-inflationary environment that has eroded the purchasing power of the Zimbabwe dollar. Most Zimbabweans use cash for their transactions since most basic goods like cooking oil, sugar and maize meal are purchased on the black market.

This has forced most economic activities into the hands of informal sector operators, the bulk of who operate on a cash basis and do not have bank accounts - or are reluctant to put their gains in banks where limited withdrawals are imposed. It can also be suggested that most people in the informal sector do not have business accounts with commercial banks in order to evade the Zimbabwe Revenue Authority tax net.

These are some of the reasons why many financial transactions are being undertaken outside the banking system. The informal sector operator needs cash to buy foreign currency used in the importation of trading stock and thereafter, the stock in trade is sold for cash to the public. The parallel market is where business is operating and this produces a vicious cycle that operates efficiently outside the banking system. If foreign currency was available in the banking system, there could be a motive to deposit all savings as part of the effort of accessing foreign currency.

Therefore, it is logical that the amount of Zimbabwe dollars needed to purchase hard currency will keep increasing in line with the depreciation of the Zimbabwe dollar on the parallel market, further putting pressure on the Reserve Bank of Zimbabwe governor to print more cash. This, in turn, fuels inflation. Individual forex money brokers have been doing brisk business especially at Harare's Road Port and Bulawayo's ‘World Bank' where in theory they operate outside of the prescribed exchange controls. The vicious circle can be broken once foreign currency becomes available through the formal banking system. The introduction of higher denominations may not help the situation: inflation is showing signs that it will not stop galloping anytime soon. Since the start of 2007, inflation has maintained its upward spiral starting off the year at just over 1,000%.

During the infamous Operation Dzikisa Mitengo, the Zimbabwe government on June 18 banned price increases and ordered businesses to slash down prices by 50%, arresting and fining business executives who defied the order. Taking advantage of low prices to stockpile on basic commodities, the public swept clean shop shelves, while businesses failed to restock after being forced to sell goods at below market value. As a result, several companies shut their doors to the public.

Quasi-fiscal activities have seen the central bank pumping trillions of Zimbabwe dollars into financing newly resettled black farmers, most of who are ruling ZANU (PF) party supporters and who have failed to produce enough food to feed the nation.

The Reserve Bank of Zimbabwe introduced the Basic Commodities Supply-Side Intervention (Bacossi) facility in September to offer cheap funding to affected business and allow them to return to full productivity. Over Z$10 trillion was injected in Bacossi together with US$13.2 million. However, much of the money accessed under Bacossi has found its way onto the stock market where it has fed a bull run. This is because the Zimbabwe Stock Exchange (ZSE) has been offering good returns above inflation in the wake of the RBZ's refusal to offer better interest rates.

Addressing the 72nd ordinary session of the ZANU (PF) central committee meeting in Harare on December 12 at the party's extra-ordinary congress, Mugabe said "The party [ZANU PF] will keep an eye on what seems to be a resurgence of high prices and our people can take comfort from knowing that we will not abandon them to the caprices of business."

With these hollow pronouncements, Mugabe did not even care announce his party's election manifesto or say how his government intended to resolve the economic crisis in the country - the biggest challenge to his 2008 re-election bid. Instead, the 83-year-old leader as usual attacked former British premier Tony Blair, his successor Gordon Brown, and US President George Bush for allegedly interfering in the country's internal problems. His speech was full of the same old clichés he has been repeating over and over to no useful end.

Zimbabweans were hoping for concrete resolutions at the congress that would transform their lives. However, the ZANU (PF) delegates enjoyed nothing short of royal treatment. The sumptuous meals complete with ice creams and bananas for dessert, the expensive cars and the elegant dressing gave one the true picture of the ZANU (PF) gravy train.

Zimbabwe is sinking deeper into economic and political chaos despite the grandstanding at the ZANU (PF) extra-ordinary congress. Instead of fighting to bring down inflation, President Mugabe is busy basking in the glory of useless so-called diplomatic victories at the EU-Africa Summit that do little to improve the welfare of his people. Salaries are failing to keep pace with galloping inflation, which has inflamed tensions in a country with rising unemployment and enduring foreign currency, fuel, electricity, water and food shortages.

The President who, some might say, should have put his time in Lisbon to good use by building bridges, reacted in his customary manner, blasting Germany, Sweden, The Netherlands and Denmark, which he described in terms harking back to the cultural revolution in China as the "gang of four". He accused the four countries of acting as mouthpieces for Britain, whose Prime Minister, Gordon Brown, boycotted the meeting. African leaders backed the President's stance that Europe was misinformed about events in Zimbabwe.

For over six weeks since mid-November 2007, Zimbabweans have been jamming banking halls, desperately seeking cash, in short supply, the latest sign of the southern African country's economic free-fall. The governor of the RBZ, Gideon Gono accuses foreign currency black market dealers of stashing more than half the total money in circulation. This year's festive period seems starved of good news given the present situation as epitomised by the current cash shortages.

Addressing the ZANU (PF) congress on 14 December, the central bank governor blamed top government and ruling ZANU (PF) party officials of hoarding money and causing cash shortages that have crippled business in the country. Gono said senior officials of President Robert Mugabe's party were among "cash barons" stoking up the country's runaway inflation through illicit dealings, adding the central bank knew who these officials were.

"We think we are helping some people with money for small to medium size enterprises, they use the money to buy foreign currency on the parallel market and drive inflation. It's not ordinary members of the party who are doing this. It's the top officials because as we can all see ordinary people have no money", Gono revealed.

Between May and September 2003, the country experienced similar critical cash shortages that saw customers sleeping outside banks to withdraw their savings. In addition, footage of empty shelves, raw sewage flowing in the streets, vehicles queuing for non-existent fuel and thousands of people surrounding money-less banks have now appeared again just before Christmas this 2007.

From 20 December, notes worth Z$250,000, Z$500,000 and Z$750,000 entered circulation. At the same time, the highest value note now in use - the Z$200,000 bill (US$6.66) - will be phased out, despite only being introduced in July. And yet just now a loaf of bread costs Z$1 million.

The zeroes that were knocked off in 2006 have come back and the governor has failed to remove them for the second time. As the computer systems fail to cope with the trillions, the governor advises the banks to go manual.

Ironically, years of decline have nurtured a generation of wheeler-dealers that cannot remember how to hold a "legitimate" job. They do not pine for a return to a stable economy, as most do, in which workers make honest money out of eight hours on the job per day. Instead, they long for a continuation of the crisis that has so richly rewarded them.

The "Black Market Barons" are perhaps now the biggest players in the economy. These are the guys that really determine where the cost of production goes, and hence where shop shelf prices end up. Thus, production costs will continue rising, as long as arbitrage opportunities abound for members of the corrupt regime of Robert Mugabe.

The macroeconomic picture is worse than ever. The formal economy has shrunk by a cumulative 65% over the past few years, capacity utilisation of industry is around 20% and agriculture is down by more than 50% for many crops.

The finance minister recently admitted that quasi-fiscal spending, mostly by parastatals, had pushed the budget deficit to 43% of gross domestic product, while money supply growth during 2005-06 was more than 1,000%. When three zeroes were shaved off the currency last year, economists predicted it would prove to be a useless gesture without support in the shape of reform to the political and economic environments.

Thousands of Zimbabweans in the main cities are trying to cope without power and in many places without water. As most suburbs are going for days without electricity, residents dig deeper into their depleted pockets to buy firewood and candles. Urban commuters fork out up to Z$1.5 million daily for transport, while travellers from Harare to Bulawayo now pay up to Z$60 million one way on a luxury coach. This is way above the average monthly salary for many Zimbabwean teachers, police constables, soldiers and shop floor workers, who often earn between Z$4 million and Z$16 million a month.

Songs with themes such as "Mugabe is a gift from God, let him rule" and "We will all vote for him and make him win forever" engulfed the arena at the extra-ordinary ZANU (PF) congress. This comes at a time a third of the country's 12 million population has fled (three million of them to South Africa), while nearly as many of the remainder survive on international food aid.

Thanks to the ingenuity and tolerance of people still in the country and the remittances sent back by those who have left, Zimbabwe's death throes could last a long time yet.

However, Zimbabweans are already facing a bleak 2008 when the next harmonised presidential and parliamentary elections are going to be held and change may not be possible if President Thabo Mbeki does not manage to enforce free and fair elections.

Zimbabweans hope that South Africa's mediation will lead to millions of Zimbabweans in the Diaspora being allowed to vote in the harmonised elections. (Why only allow Zimbabweans posted abroad on government duty?) They also hope for an independent electoral body which inspires confidence and protect the integrity of the democratic process to deliver a free and fair election. Last but not least, they hope for transparent voters' role and the delimitation of constituencies.

There is now an early opportunity for opposition parties to close ranks and at least eliminate ZANU (PF)'s two-thirds majority in Parliament. Not just that, but because of the economic hardships, there is even a possibility for the opposition to win both the presidential and parliamentary elections.

Hope springs eternity. Hope is the main ingredient in resolving feelings of loss and grief caused by political violence. Hope for a better future also works to provide strength to persevere, leaving despair on the outside. And we rejoice in the hope of the glory of God. Not only so, but we also rejoice in our sufferings, because we know that suffering produces perseverance; perseverance, character; and character, hope. May the God of hope fill you with all joy and peace in your faith, that by the power of the Holy Spirit, your whole life and outlook may be radiant with hope. (Romans 5:2-4; 15:13)

Finally, be strong in the LORD and in His mighty power. For our struggle is not against flesh and blood, but against the rulers, against the authorities, against the powers of this dark world and against the spiritual forces of evil in the heavenly realms. (Ephesians 6:10, 12)

A MERRY CHRISTMAS AND A HAPPY & PROSPEROUS 2008 TO YOU ALL!!!!