Economic Collapse

The evidence of economic collapse is becoming more and more evident in Zimbabwe. By the end of this week the pound will be trading at Z$2 million to 1 and the US dollar about Z$1 million. The Rand is already well over Z$100 000 to 1. Inflation is now at dramatic levels with prices and costs changing daily. People operating the open market for foreign exchange simply cannot get enough local currency for their transactions.

Major firms who must import their raw materials and other key inputs have suspended sales of finished products because they cannot determine a price that would allow them to recover their costs and replace their stock. Another interesting phenomena are the slowing down of the flow of remittances into the country because the local recipients can no longer buy locally produced food and essentials. People with relatives inside Zimbabwe sending food and numerous systems for such imports are now in place.

The ability of local service providers such as ZESA, the PTC and the cell phone companies, together with the Urban Councils and the transport infrastructure to maintain their activities is now at dangerous levels. Water supplies are short in almost all urban areas, clean water is increasingly short and insecure - a recent analysis showed that the City of Harare water supply was untreated.

The State brings Sable Chemicals on line and this results in electricity supplies to all other users dipping to levels where output and services cannot be maintained. The predictions for the weather this summer are all positive but there is no seed, no fertilizer and no fuel. What fuel there is available has to be bought with hard currency or you pay a premium of 30 to 40 per cent over the market rate for fuels and oils.

My own estimate of inflation is now at 22 000 percent and rising the official rate is over 8 000 per cent. This is making it impossible to replace assets or stock levels and very expensive to import anything. Local currency is virtually worthless. Price controls remain in force but are totally ineffective and have simply served to bankrupt formal sector firms while driving all products into the parallel markets where prices are as much as 5 times the official prices.

Food supplies - bread, oil, sugar, meat, milk, eggs, maize meal and rice, even pasta, are almost unobtainable. Queues form instantly at any retail stores that get deliveries, yesterday I saw a crowd outside a retail store on 9th Avenue that spread out onto the street and impeded traffic. Pet food is scarce and pets are going hungry along with everything else. Stock feed is very expensive and in short supply so those who keep poultry, pigs and dairy cows face very serious problems of supply. When we start eating our dairy cows and slaughtering our laying hens, protein shortages will become even more serious.

At our factory in Belmont the staff were idle at their machines yesterday - we had orders but no raw materials. The senior staff were all sitting in the reception; the sense of fear was palpable. What on earth are we going to do? We strategize and came up with one or two suggestions, nothing very helpful. The mills at Kadoma had no water - could not produce fabric, plenty of water in the supply dams - Zinwa had failed to maintain the pumps.

Those talks in Pretoria will be overtaken by events if they do not get on with them and come to a conclusion. Then we are going to have to work on the transition - without some stabilisation we will never get to an election in 2008.

Eddie Cross
Bulawayo, 18th October 2007