Putting out the Fire

A few days ago, the old Railway Headquarters building in Bulawayo was burned down. The fire started in an area of the building where some people were selling fuel in small containers - now a widespread occupation in a country where not a single filling station has fuel to sell.

The local fire brigade came and started to try and put the fire out - with little effect as the building eventually burned to the ground. While this was going on the ever-present riot squad arrived and leapt off their trucks and lined up armed with batons, plastic shields and tear gas? They formed a line in front of the curious crowd and then an old man in a hat came forward and in clear Ndebele said to the nearest man in the riot team "do you not understand that your batons cannot put the fire out?" The crowd loved this bit of wisdom and fell about laughing - the riot police were not amused. But he has a point. Batons do not put out fires.

We have four fires burning out of control and beyond the capability of the local fire station squad - food shortages, a fuel crisis, runaway inflation and shortages of liquid cash. In all these instances, the ineptitude of the government after 23 years in power has been quite astonishing.

I find this unbelievable - I have many old colleagues who are in the present government. Nathan Shamuyarira, 20 years a Minister, an excellent degree from a prestigious University in the States, Herbert Murerwa, Minister of Finance and a friend for more than 30 years. There are several other people with doctorates in government and yet they are completely at sea when it comes to getting to grips with the present crisis. Mugabe himself is a brilliant intellectual with several degrees - two of which involve economics. The Governor of the Reserve Bank is an excellent banker with many years of experience and a sound background. The Secretary of Finance is a clever and dedicated Civil Servant - what is wrong with all these people?

One explanation is that they have simply been there too long. I know from personal experience that it is very difficult to be innovative and totally on top of a very senior position for more than about 5 years. So maybe they are just tired and have run out of ideas.

Another is that they have become corrupt and the national interest is no longer their driving ambition or goal. Perhaps they see no future for themselves and their families and they are now totally predicated on accumulation of resources - especially those that can be employed externally in the near future. All other considerations are being swept aside. I can see this in the present situation and there is a lot of evidence to support this thesis.

Yet another, is my old mans explanation - faith in the wrong instruments. If we look into the four fires I listed above we can see how these are out of control and are not being handled by the government in any sort of realistic way.

The food crisis is now into its third year - and will persist well into 2004 and maybe 2005, as there is little hope of rescuing the farming industry in the remaining months of this winter. Despite all the evidence of failure, the State simply continues to blame everyone except themselves for the crisis. This year they have gone one step further and has thrown up their hands in a gesture of helplessness, blaming the "donors" for neglecting the agricultural sector and demanding that they now feed the entire country for the next nine months. The collapse of agriculture - even in the peasant sector, is continuing and the outlook for the coming summer is bleak. What are they doing? They continue to intimidate and coerce the farmers that remain to get off their land and abandon their assets and leave the country. When confronted with legal orders to stop interfering and thieving - they simply resort to force.

In the fuel industry, we have now had 4 years of chaos. Endemic shortages and no signs of any long term solutions or even attempts at the orderly control and distribution of what is available. Corruption in this sector is endemic - heaven only knows what has been stolen and lost through the national oil procurement agency, NOCZIM, in the past decade - it runs to hundreds of billions of dollars. When finally all this stupidity in economic terms results in the country earning insufficient foreign exchange to pay for the essentials, the State throws up its hands in a futile gesture and lets everyone do their own thing. Fuel prices go from being the lowest in the region to the dizzy heights that they have reached in recent days of up to US$3 per litre - nearly 6 times the cost of fuel in South Africa.

Then inflation, even the Central Statistical Office now says the rate of inflation as at the end of June was 365 per cent. But in the supermarkets prices are 10 times what they were a year ago. Bread in 2002 started the year at about Z$25 a loaf - 18 months later it is anything from Z$700 to Z$1000 a loaf - and the bakers are short weighing their bread! The private sector has tried to keep pace with inflation in the wages they pay their staff - but the government leaves the tax threshold at Z$15 000 a month - so now a sweeper in a factory pays supertax on his income.

Living standards have collapsed with disastrous effects on the lives of millions. In one case an elderly pensioner in Harare looked at his meager income one month-end and went into his bedroom and shot himself. After a lifetime of work, he could not afford even the most basic things of life and simply could not face the future. For millions the only answer is to flee the country and as a consequence one quarter of the total population now lives outside our borders.

What does the State do about this situation - nothing. The deficit on state expenditure this year will be a staggering 35 per cent of GDP. The National debt - which was about 20 per cent of GDP at independence, is now approaching three times the GDP. There is no possibility that this can ever be repaid and yet this collection of goons continues to borrow from a complacent and criminal banking industry at the expense of every man and women in the country.

And now, these idiots have run out of the one resource that is totally under their control and management. In all my reading of economics I have never heard of a country which ran out of its own money! This week a whole phalanx of Ministers and Zanu PF bankers took to the television screen to detail how they were going to deal with this latest crisis. We watched with fascinated curiosity, is this another fuel crisis - promised solutions every week with the shortages simply getting worse?

We were not disappointed. Now I want you to get this straight - we have about Z$200 billion in liquid cash circulating at present - growing at the rate of about 7 per cent a month. Problem number one is that we need about 5 times that sort of growth in the money supply to keep pace with inflation.

So what do our collection of geniuses do? They announce that they are going to take Z$130 billion dollars of liquidity out of circulation - and burn it! This is the new red Z$500 note that we have had for about a year. It's a good note - printed on very expensive paper from Germany - probably the most expensive currency in the region. They say it cost Z$800 to print each note - so your looking at a loss of nearly Z$40 billion on this futile exercise.

Having now reduced the cash supply by nearly two thirds, they are going to print a new Z$500 note to replace it. But they can only print Z$21 billion a month so it will take 6 months to get us back to where we were in July - and by then we will need goodness knows how much currency to meet demand. The other sweeping "reforms", a new Z$1000 note will come into play in October - one month before originally planned. In addition the banks are going to look into the use of travelers cheques as an alternative to cash - at a service fee of course.

Then the Minister of Justice - we have one of those as well - came on the box to announce that from Friday this week it will be illegal to trade in Zimbabwe currency. The theory being that this is the main cause of the shortage. Of course once you have a shortage of a thing as basic as money - it will take on a life of its own. More egg on their faces can be the only result after the failed attempts to control prices.

Let no one underplay the importance of the cash shortage. The food crisis will be resolved eventually as the developed countries dig deep and pay for fear of images of starving children. The fuel crisis will be ameliorated by the ingenuity of the business community who are already getting on top of the situation - there is almost more fuel available now than there was before the filling stations ran dry. The inflation is like the rising temperature in a bath of water - eventually we nay get boiled alive, but for the time being its OK.

But the cash shortage is another matter. It affects everybody - Police, Army, Civil Service, workers and employers. If you cannot get money to pay for the goods and services you need to live, the crisis is immediate.

The Trade Unions have given the government 10 days to sort things out - if not they are threatening action. This time, things may just have gone to far and it could just be that "D" day has arrived. For the Police, it's the same solution as for everything else. When a crown of about 2000 people outside a financial institution became restive they laid into them with whips and dogs. What they need to realize is that those kinds of actions "do not put out the fire!" I think we would be better off with the old man in hat in charge than this collection of clowns.

Eddie Cross Bulawayo
31st July 2003