For most people the situation in Zimbabwe is quite bewildering. They
very hard to work out what is happening and to understand why. In fact
you observe a few simple, but fundamental rules, it is quite easy to
understand why the collapse here has taken place and the speed with
has destroyed what had been quite a decent, if small, economy.
In my own business I have to observe these simple rules every day -
out of business. So for example I watch the following issues very
a daily basis:
1. Does my staff feel they are a real part of the business and have a
real say and stake in what goes on? If not, I cannot command their
and commitment to the business and without that, we simply cannot
the long term
2. Are we making more money than we are spending? Its very simple
you can ignore the issue of 'profitability' because that can mean
things, but you cannot ignore your cash flow. In basic terms if you are
making more money than you are spending, you are going broke.
3. Management is about managing change. Our working environment is
every day - sometimes by the hour. You cannot do much about the
taking place but you can learn how to surf the waves and enjoy the
If you do not, you will pretty soon find yourself on the beach.
It's like that in the country. If you print more money that is
needed to fund day-to-day transactions, you reduce its value. It's
pouring water into a glass with some cool drink concentrate in the
Put too much water into the mix and it is tasteless - in monetary
will buy less. By doing so, government destroy value and savings, they
secretly tax their people by reducing the real value of what they earn
have in their pockets by running the presses at the Reserve Bank.
If a nation spends more than it earns it has two options - it can
money from others willing to lend or it can print money. In the first
instance if they borrow from those who are a captive lender and take
advantage of their power to do so on uneconomic terms, then they pay a
return on such borrowings than would be demanded in a 'free'
happen in Zimbabwe. We run a budget deficit that is extraordinary by
historical and world standards - last year it was over 60 per cent of
When even borrowing on the scale we undertake simply cannot fund this
of spending then we print money, vast amounts of it and in doing so we
foster inflation and destroy value. This is why the real earnings of
everyone who lives in Zimbabwe are now down to about 10 per cent of
they were 20 years ago. This is why all pensions are no longer worth
paper they are written on. I think the failure of the pensions industry
protect the real interests of their clients is an absolute disgrace. In
own case I contributed to 5 separate policies for all my working life
when they matured it would have cost the company more to write me a
thanking me for 50 years of servitude and to write a cheque that would
buy me three loaves of bread today.
When governments behave like this they are in criminal dereliction of
duty towards their people. That is the position of the Zanu PF regime
Zimbabwe today. The fact that the private sector has been complicit in
whole exercise is another shameful episode.
Then we come to two other key issues. The first is the truth that
only look after what they own or have secure tenure over. When I was a
boy my father became an alcoholic. He started out as a social drinker,
got out of hand and when he finally woke up to what he was doing, we
homeless, broke and five kids dependent on a working mother with a
We moved from a large home in an up market area to what was effectively
slum; Municipal housing occupied by low-income families. When we had
there for a few years, the City decided to give us title. We were
treat the rent we had paid as a deposit and were given a bond for the
The transformation was immediate; people painted their homes, put up
and planted gardens. I have never forgotten the lesson.
Even today you can drive around any suburb and you will see which homes
owned and which are rented. In the agricultural sphere it is the same
foundation of productive agriculture is a sound and secure tenure
within a functioning legal system. Destroy that and you create deserts.
Africa's biggest problem is the loss of productive land through land
degradation. That is why our deserts are growing faster than anywhere
in the world.
The second truth is that only markets can allocate resources
make the hard decision as to what a product or a service is worth. You
interfere with this principle and you will pay a terrible price. I have
it all too often - try to knock a price down in a negotiation and you
often get nowhere until you can say the magic words, 'I can get this
In Zimbabwe we have violated all these fundamental principles and are
paying the price. The loss of security of tenure has destroyed our
The failure to observe basic discipline in our economic affairs is
inflation to historic levels, the attempt to halt inflation by
control, is now wiping out what is left of our economy.
I warned my colleagues in the MDC leadership the other day that no
owned firm or even a locally owned firm would accept the demand for 51
cent control. This is true for any country in the world but even more
Zimbabwe where everyone knows what the intended beneficiaries would do
Countries, like ordinary people, can only learn from their mistakes. We
certainly doing that and I see in that process great hope. Perhaps when
finally we throw off the yoke that we were landed with in 1980, a new
generation of leaders will come to the fore and having seen what
when you disobey the basic rules of economics, will instead make the
necessary decisions to take the country in a radically new direction.
not rocket science.
Bulawayo, 24th August 2007