I walked into a business here in Bulawayo this morning to discover that
staff was basically cleaning up prior to shutting down. The owners were
already in South Africa - they had left without telling many friends
they were going. This is an event taking place across the country right
now - business people are deciding that they have had enough. They
export at ruling exchange rates, local demand has simply disappeared
they have no raw materials and no cash to continue operating.
The Zimbabwe economy is closing down - literally. We have inflation now
nearly 1200 per cent per annum (28 per cent in May and 21 per cent in
so it is still accelerating). But unlike the situation in most other
countries that have experienced hyperinflation, the Zimbabwe economy is
imploding at the same time. GDP is now down about 50 per cent, exports
two thirds and if it is at all possible, output in all sectors -
agriculture, industry is down again this year over last.
The reasons for the implosion in the economy are largely
They rank from open threats against owners of businesses, expropriation
theft of assets by people associated with the ruling Party. The near
collapse of the legal system and massive political interference with
left. To this you can add total confusion in terms of macro economic,
monetary and fiscal policy. Totally skewed exchange rates accompanied
wholesale theft of revenues and the misuse of scarce resources
a patronage basis.
In recent weeks the reports of accelerated decline have poured in -
output down by a third on last year, winter cropping down 50 per cent,
electricity supplies down to 70 per cent of demand and threatening
activity across the board. The tobacco crop down by a third and
that the coming crop could be very small - perhaps less than 20 000
Industrial activity shrinking fast and, if it was at all possible, the
numbers of foreign tourists still dropping.
The only sector that remains an area of potential growth is the mining
sector - driven by the very buoyant international prices for minerals
the existence in Zimbabwe of considerable reserves of chrome, nickel
platinum, plus a host of other less strategic minerals. Even here,
intense international interest, all maintenance and development is on
Threats to expropriate more than half the equity invested in existing
have stopped the industry in its tracks.
In Bulawayo - once the industrial heartland of the country, the decline
clearly evident in the empty streets and long lines of empty parking
outside stores in the City center. It is also evident at 17.00 hours
day when in the past thousands of workers walked from factories to bus
depots for their journey home. Now the streets are virtually silent and
there are no buses at all.
I know it sounds like a broken record but it is the maize situation
highlights the sheer lunacy of this regimes management of the economy
me. Just look at these numbers.
We require 5 000 tonnes of maize a day to feed the country. Of this 3
tonnes is for human consumption as maize meal. Last year the State
1 million tonnes of this product into the country and in addition
supplied basic foods for over 3 million people every day. As I write,
000 tonnes of white maize is coming into Zimbabwe from South Africa
day. This costs about R1200 per tonne (at least) and on top of this you
add another R160 per tonne for administration. So we are talking about
product that costs R1360 per tonne - perhaps even R1400 per tonne when
finally sold to the local millers.
The selling price of the GMB is R12 per tonne at market based exchange
rates, R37.50 at the bank rate. Whatever they sell it for, the loss on
product is well over 99 per cent of its cost. The numbers are just
staggering - at official exchange rates (which bear no relation to
the loss is Z$22,4 million a tonne or Z$44,8 billion a DAY!
How do they manage this? They don't. I must assume that the South
government is in fact providing the maize on credit to Zimbabwe in an
to keep the Mugabe regime afloat. This means that, at last years rate
imports South Africa is building up debt with Zimbabwe at the rate of
million a day. Add that to the power subsidies being ploughed into the
Zimbabwe economy at the same time - also through another bankrupt
and you come to the total debt build up of some R2 billion a year at
very least (US$350 million).
Zimbabwe did the same thing with Kabila in the Congo - we sent in 15
troops with all their support equipment and it cost us over US$1,3
day for 4 years - we got nothing back and it is one of the reasons for
collapse in the Zimbabwean economy. South Africa can afford to spend
sort of money - but I also assume the South African government has not
informed its own stakeholders and tax payers of the liabilities
They are simply fudging the books. For his part Mugabe has no
like Kabila, of ever paying the debt back.
In other areas the South Africans are also covering up the real facts.
Illegal migration to South Africa via Botswana has been estimated at
people per day and via the Limpopo border with South Africa at 2 500 a
that is one million new illegal migrants a year. Some are caught and
returned, most disappear into the murky depths of South African slums
townships. Some of this movement is simply people going home for a few
days - but many are new entrants to South Africa.
The full impact of the implosion in the Zimbabwe economy has yet to be
in South Africa, even at these horrific levels of social dislocation.
can only get worse. I watch the great success of the German World Cup
and wonder if the South African event in 2010 will not become a victim?
could so easily. I also read in the Mail and Guardian newspaper that
alliance is under threat. This would destabilize South Africa in a big
if it happened. Why play with the possibilities? All South Africa has
is use its leverage on Mugabe. Is that so hard to understand or do?
Everybody tells me this will never happen and they have all sorts of
reasons - none of them very rational, to explain why. Often this
accompanied by a lot of African mumbo jumbo - nonsense. It all boils
When the price of Zimbabwean stupidity and intransigence gets too high,
those with power and leverage over the situation here will pull the
and then I expect a real breakthrough. The question is are any of us
for that event, or will it simply be another Tsunami that washes away
good with the bad?
Bulawayo, 14th June 2006.