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Eddie Cross's Website

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Eddie Cross - Bulawayo, Zimbabwe

2008 Articles
25 Dec Kingdom Come
21 Dec Christmas
15 Dec Step Forward
5 Dec Beginning
1 Dec Amendment
30 Nov Facilitation
26 Nov Genocide
24 Nov Running Out
17 Nov Crisis
15 Nov Somalia
12 Nov What Next?
8 Nov Leadership
2 Nov Chipo
1 Nov Rome Burns
29 Oct Failure
25 Oct High Noon
19 Oct Never Easy
10 Oct Abyss
8 Oct Filibustering
4 Oct Chaos in Zim
29 Sept A Mule?
21 Sept On Step
16 Sept The End
12 Sept New Beginning
11 Sept Deal?
6 Sept Consequences
3 Sept Need a Deal
2 Sept Dollar Died
31 Aug Steering
29 Aug Unstuck
23 Aug Betrayed
18 Aug The Devil
13 Aug 13 Aug 08
12 Aug Today
11 Aug Cliffhanger
8 Aug Whats Going On
27 Jul Progress
22 Jul Agree to talk
21 Jul Mbeki kicks
16 Jul Crunch Time
13 Jul Economics
9 Jul Reality Looms
2 Jul Where?
30 Jun Looking Glass
26 Jun Battle
22 Jun What Now?
21 Jun The Commitment
16 Jun Do or Die
13 Jun Morning After
10 Jun Closing Doors
26 May Current Outlook
24 May Fan Club
19 May Tyranny
17 May End Game
15 May Flushing
8 May Violence
6 May Bizarre Process
25 Apr Cornered
20 Apr Electoral Fraud
19 Apr Jesse
17 Apr This Farce
11 Apr The Devil
6 Apr Wounded Buffalo
1 Apr Dying Kick
31 Mar Politcl Tsunami
27 Mar Current Situ.
26 Mar 4 days to go
21 Mar 8 days to go
15 Mar Election Time
27 Feb Games Begin
17 Feb Public Office
11 Feb Choices
4 Feb Decision Time
26 Jan Ambushed
25 Jan The Struggle
20 Jan Truth or Fiction
12 Jan Mugabe Mistake
8 Jan Surprise
2 Jan Kenya Lessons

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The Economic Fundamentals

Despite the paucity of statistics in Zimbabwe due to the near collapse of the system, it is possible to analyse the present economic situation based on what we know of the fundamentals. It is clear that inflation is now at record levels exceeding the experience of other countries who have gone through such a phase and that economic activity has slumped to new lows. The traffic in the towns are a clear indication of this.

If what we believe is happening, the GDP will have slumped to a new low of about 40 per cent of the level achieved 10 years ago. It certainly will decline by 12 per cent or more this year alone. This process is being driven by falls in the real output of all industries and sectors of the economy. Even mining, despite high international prices and demand and some new investment in the platinum sector, physical output is falling.

Industry seems to be the most affected at present and whereas output last year would have been about 60 per cent of 1998 levels, by the end of 2008 it will be perhaps half of this - driven by a cocktail of problems from power shortages, to foreign exchange shortages and price controls. Tourism shows no sign of recovery and if it is actually possible, farm output is in steep decline driven by insecurity and lawlessness, low prices and the shortage of virtually all inputs.

The inflation spiral we are in is being fed by a massive budget deficit - funded by printing money mainly, and by the abuse of the foreign exchange system. The latter is being managed both to reduce the real value of remittances to Zimbabwe and to allow those associated with the regime to secure hard currency at very low 'official exchange' rates. This is tantamount to printing money as the RTGS system is used to buy hard currency on the local market at massive premiums.

Unable to cope with the very rapid depreciation of the currency and watching their working capital being consumed by inflation, business organisations are now simply closing down. Major wholesalers and retailers are particularly affected as there are no credit facilities available and they are unable to finance their stocks. A serious breakdown of the distribution chain has taken place. Manufacturers are not far behind and only those who are exporting a majority of their output are surviving.

In the mining sector, threats of nationalization without compensation together with the continued control of marketing and the use of the interbank rate for the payment of local currency for a proportion of export sales and the maintenance of an artificial price for gold, is affecting returns and confidence. This, coupled to shortages of essential inputs and electrical energy, are further curbing output and investment.

In the agricultural industry, maize production in the past season is now estimated as only 425 000 tonnes while winter cereal production looks as if it will only be a fraction of last years output. This is due to a shortage of inputs as well as continued farm invasions and insecurity. Tobacco sales are down on last year and it is expected that output could decline again this year due to uncertainty and the non-availability of essential supplies and electricity. Oilseed production is down and for the first time there is a shortage of tea, fruit and sugar - all normally in free supply.

One immediate consequence of this situation is a critical shortage of all basic foods. What little is available is now priced at levels significantly above those prevailing in South Africa - a reversal of the historical relationship. This situation is so serious that it is likely to result in mass starvation if it is not attended to soon. Political controls over the supply and sales of food are now universal and seriously affecting the welfare of those in the cities and in the rural areas who supported the MDC.

One of the new consequences of this state of affairs is the inability of staff in all State controlled institutions to cope with the situation. Poorly paid at best and with salaries that simply cannot keep up with the inflation, they are unable to maintain their standard of living. Many State departments and services are collapsing. How the PTC and ZESA are maintaining their activities is anyone's guess.

Couple this situation with the widespread violence and intimidation and you can understand why millions of people are on the move. They are desperately trying to get out of the country - to anywhere that might offer a means of support and shelter. South Africa is the main destination and I simply cannot even imagine how many people are moving south on a daily basis.

Today a local businessman said to me that traffic from South Africa to Bulawayo was running at 25 pick ups per hour to the City and 4 times that number to Harare. This is as South African migrants respond to the increasing desperation of their families at home.

The Zanu PF regime shows no sign of understanding or being even willing to do what is required to bring this situation under control. I cannot believe that they do not know what to do - its quite simple really but needs political will and a determination to get things right. Both seem to be almost completely absent.

I said to a friend recently that Mugabe and Zanu PF are like a small boy who has been chasing a large bull in a field. At last the bull has stopped and they have the bull by the tail - but they have no idea what to do with it and run the risk that this will annoy the bull that, with further irritation, might turn around and toss the kid into the bush with its horns. The other danger for the kid is that the bull will do what comes naturally and Zanu PF will find itself covered in you know what!

Whatever, the kid is not in charge of the bull and they know it - but they simply do not know what to do - the wise thing would be to drop the tail and run. But then Zanu PF is not given to wisdom - in any field.

Eddie Cross
Bulawayo, 12th July 2008