Mugabe sits snug amid the wreckage

IF ZIMBABWE’s economic numbers are at all reliable, President Robert Mugabe’s 27-year rule should be nearing its end. Gross domestic product, already down 40% since the government’s accelerated land reform programme was launched in 2000, is declining this year at its fastest rate yet — probably about 12%, say economists. May inflation was 4530%, with most analysts predicting a June figure of at least 6000%. But because the authorities believe that the release of official inflation figures encourages businesses to raise their prices, inflation numbers are no longer being published. Instead, the government statistical office has been told to develop a new, sanitised, inflation figure that “better reflects the situation on the ground”, said one official. Unofficial estimates put the June figure at 15000%. The government’s own figures put the poverty rate at 75% (in 2003), while formal sector unemployment is estimated at 50%. Ironically, both of these are improving because, according to South African estimates, 2000 Zimbabweans enter SA illegally each day. Official estimates put the population at 12-million but it is believed to be substantially less — perhaps as low as 10-million. Accordingly, per-capita incomes are higher than estimated while unemployment is lower. When Mugabe took over as prime minister in April 1980, the Zimbabwe dollar stood at US$1,50. Today, at the official exchange rate (Z$250 to the dollar), it is worth less than half a cent, while at the much more realistic parallel rate of Z$100000 to the dollar, it is all but worthless. Yet, despite this record of economic failure, it is hard to find anyone willing to wager on Mugabe leaving any day soon. Even those who have been the target of his “price blitz” — whereby retailers and manufacturers were ordered to halve their prices or face heavy fines, imprisonment and the expropriation of their businesses — are to be heard defending this action. The Retailers Association has issued a public statement that admits implicitly that many of its members were guilty of profiteering; organised commerce and industry has come out in favour of agreed “pricing models” that will specify markups for individual companies and sectors. The trade unions, which bitterly oppose Mugabe, are in disarray, with their members welcoming the price cuts. Some businessmen, no doubt with an eye on the government’s plan to force companies to sell 51% of their shares to indigenous Zimbabweans, are anxious to be seen and heard defending the government. All of this is grist to the government’s mill. It is claiming credit for cutting the parallel market exchange rate to Z$100000 to the dollar this week from Z$200000 a fortnight ago. The July inflation figure will show a sharp fall, and the authorities might go back on their plan to suppress publication. But short-term gains aside, there is no exit strategy from the price freeze. One garage owner said he lost Z$300m ($1,23m) in three days when forced to sell fuel at less than half the price it had cost to import. Industry Minister Obert Mpofu says his officials are working on pricing models to make controls “permanent”. However, the dozens of filling stations with no fuel, closed butchers and the fast-emptying shelves in the food stores where staff pack meat counters with soft drinks are a reminder that time is running out. Mugabe’s threats to take over factories that close or retrench staff are being countered by industrialists, who produce evidence of applications to the central bank for foreign currency to pay for essential imports. Last week, Gideon Gono, governor of the Reserve Bank of Zimbabwe, admitted publicly that foreign currency was extremely short — the key priorities being imports of fuel, electricity and basic foodstuffs, especially maize and wheat. John Robertson, an economist, says that the crunch “cannot be far away”, but some other analysts expect Mugabe to climb down as gracefully as he can by ordering the central bank to print the money needed to finance huge consumer subsidies, especially for meat, bread and fuel, while simultaneously relaxing the price freeze to allow companies more realistic markups than the 5%-10% mooted. Despite the meltdown, there are many winners — those able to exploit the price cuts that have opened up a Pandora’s box of black-market opportunities, the well-connected party “chefs” able to become US dollar millionaires in just three transactions by buying foreign currency at the official rate from the central bank and selling it in the black market, and those close to the seats of power cashing in on their political muscle. Financial Times