Eddie Cross's Website

Economic Collapse

Today the Rand went over 3 000 to 1, the US dollar went to over 30 000 to 1 and the price of beer, bread and fuel doubled. I raised our salaries by 50 per cent two weeks ago and I am going to have to find another 100 per cent next week. People cannot afford even the basics, money has no value and everybody is talking about prices and the specter of economic collapse.

The government simply does not know what to do next - a 400 per cent salary increment to teachers is now virtually wiped out just weeks later. They have imposed price controls only to find that market prices have soared to, in some cases, 5 times the so-called controlled price (bread is now about Z$4000 a loaf - the controlled price is Z$825) even though the latter was fixed just two months ago. When the State tries to enforce prices on traders, the product just disappears overnight. I have not seen a bottle of vegetable oil in 4 months. The only product that is occasionally available is imported from South Africa.

State institutions are not able to move with the kind of speed that is needed to survive in this situation. All of them are reeling under the strain - foreign exchange is unobtainable except on the parallel market and there the prices rise daily. They cannot generate enough local currency to pay for the currency they need - and it has to be in cash. Maximum withdrawals from the banks are Z$1 million - that is not enough to fill your tank at Z$17 000 or Z$18 000 a litre.

The total collapse of these institutions is now almost inevitable - they simply cannot pay their bills and cannot buy the essentials they need to operate. People must be close to saying that it is simply not worth their while going to work.

I run a retail operation and have watched my sales rise from about plus 1000 per cent up at the start of last year to 4 800 per cent this month. That just about tracks the sort of inflation that ordinary people now face in their daily lives. In this situation we must remember that this affects everybody. Pretty soon we are going to face complete stock outs of essentials and only those who have foreign exchange will be able to get them. The quality and delivery of all services is about to crash.

The question is what are the political implications? This coming week the future of Zimbabwe will be decided. The Zanu PF Central Committee meets to decide whether to accept that Mr. Mugabe is to be the sole candidate for Zanu PF in the March 2008 elections. There can be only one outcome of that meeting - they will politely decline his offer to stand, tell him he has been a great and heroic leader, but it is time to 'ende Kumusha' (go to your traditional home). Then they will agree to select and appoint a candidate at the December 2007 Zanu PF annual conference. That will then mark the end of a remarkable political career.

The SADC will hold a key meeting of its own in Tanzania and at that meeting they will decide what to 'do' about Zimbabwe. They will review the situation and consider the different options and then come down on the side of change. They will agree that this situation simply cannot be allowed to continue to slide in this fashion, that the collapse in Zimbabwe is a real threat to regional stability and progress and they will demand progress on a negotiated agreement on how to restore legitimate government in Harare and halt and reverse the decline in our fortunes.

Somewhere else in the world, the new task force on Zimbabwe will be convened and at that meeting the international community will decide what solution to back and what minimum criteria will have to be satisfied to get their acquiescence to any agreed resolution of the crisis. They will examine a possible timetable and set out what kind of resources they might make available to the process on a collective basis.

For most the end of Mugabe's career as President will be the signal event in these times. What people may not appreciate fully, are the direct consequences of his political demise. From the 1st of April he will be yesterdays man - he might still live in that fancy Chinese monster he calls home, he might still ride around in a long cavalcade with outriders and may still be guarded by stony faced guards with fixed bayonets. But it will be an empty shell that we see and hear. His power will wash away from him like the receding tide.

His loyalists and all those who have slavishly followed his every dictate will suddenly realize that on April the 1st 2008, they will be stripped of power and privilege. That new powerbrokers will run the show and they will have to decide what to do. Those who have broken the law and stolen things that did not belong to them will also be thrown back onto their haunches and forced to think about their future. Many will flee; others will try to make new alliances.

The people who control the investment levers are already putting out feelers - asking to what degree are local stocks under priced, what price assets, can we buy farm title deeds? They are talking to people who want to go and making plans to come in their place. They are considering future investment possibilities in those sectors that will recover fast (tourism and mining) and in those areas where assets can be had for 5 per cent or less of their real value. I spoke to a London based group last week that have in fact done just that for about that price for assets in the mining sector.

The international community will breath a huge sigh of relief and plan to put some resources on the table and to try and help get things under control. They will focus on stabilizing inflation, getting essentials into free supply and the rehabilitation of our medical and education systems. They will begin to assess priorities for 2008. They will move to help us hold free and fair elections in March next year as these will be both the mechanism for transition and the door to recognition and recovery.

What must we do under these circumstances? We must prepare for these changes and hold things together for a bit longer. We are a community renowned for our ability to 'make a plan' and that is just what we are going to have to do. We are going to have to help people get through this inflation storm, help each other to keep our firms in business and our local authorities in a position to deliver essential services. We will need to prepare to vote for the candidate of our choice next year and ensure that they too 'have a plan' .

Eddie Cross
Bulawayo, 23rd March 2007