Countries do not go bust, they sag at the knees

The country Manager for Zimbabwe at the World Bank is a good friend and colleague. He knows Zimbabwe well having lived and worked here off and on for over 30 years during his long career with the Bank. He retires in May and we will miss him as a country, behind the scenes he has done more for us than most in the past decade.

I was in near despair last week over the state of the economy and could see no way out. I expressed the view to him that I could not see how we could carry on like this for much longer. He laughed at me and said, “Countries do not go bust; they just sag at the knees”. Well, let me tell you, we are sagging, big time, again.

During the liberation war when it really looked as if a compromise was impossible and the struggle would end with our cities burned and our economy destroyed, I went to my Chairman at the time; a remarkable man called Bill Margolis, and asked him for advice, “What can I do to help resolve the situation?”

He thought for a while, then he said to me, “Eddie, the best you can do for your country is to come to work in the morning and do your job to the best of your ability.” I was a bit disappointed, I had expected something a bit more activist and dramatic, but I went back to my office and followed his advice. I became Chief Economist of the AMA, then the largest business organisation in the country and was later on appointed the CEO of one of our major subsidiaries. When I got there the war was at its height and the sense of crisis, all pervasive. Our staff were pensive, what future was there for them and their families?

At my first management conference I spoke to the entire management team (we employed about 3 500 people) and said that if we were to help our country through the political and economic crisis we were in then, we had to get out there and do our jobs to the best of our ability. At the time we delivered fresh milk to every home in the country, provided a small sachet of milk to every child in school. I said “we are going to rattle the milk bottles outside every home, every day and let people know that life goes on even in the toughest times”.

In one incident, a military unit was protecting a major bridge in the lowveld and was attacked one night with heavy weapons and mortars. They were weary and shell shocked at dawn and were resting in their bunkers, when down the road to the bridge came one of our vendors with fresh dairy products and ringing his bell. They could not believe their eyes or ears. It was a small promise to them that life goes on even in the toughest times and that we were there.

We got through Independence and as one of the most senior economists in the country; I did make a small contribution to the changes in the country by helping the new government settle in and understand the economy they were taking over. I also helped organise the first major donor’s conference in Harare and went on to head up another, larger corporation and then the Beira Corridor Group.

I still do not quite understand how we survived the struggle up to Independence in 1980, but we did. Then we went through the decade from 1997 to 2008. Hyperinflation at record levels, a failed State in many ways, the fiscus unable to fund even the essentials. Three quarters of our population on food aid; 3500 people dying every week, millions fleeing the country as economic and political refugees. Stores and filling stations empty, people buying even the most basic things in neighboring countries. How on earth did we survive, but we did and even now we look back and say how did that happen?

And now yet another full blown economic and political crisis; from 2009 to 2012 we saw the economy bounce back – GDP recovered, the informal economy emerged and the revenues to the State surged – doubling in 2009, again in 2010 and then growing by over 50 per cent in 2011 and 2012. Then the election campaign and the hope of change and perhaps a period of rapid economic growth and recovery fuelled by new confidence, changes in leadership and policies and the engagement with the global community.

It was not to be and on July 31st 2013, Zanu PF emerged with a two thirds majority. The President appointed a Cabinet without a single new face, the same old tired crew that brought us to our knees in 2008 and which had steadfastly failed to deliver growth and stability in the previous 34 years. The same team that gave us Ghukurahundi and Murambatsvina. The markets reacted instantly – the stock market fell by a third, investors sold equities and took their money out the country, cash fled from the banks to safer havens and in a matter of days it was clear that the banking sector was in dire straits.

By December the economy had begun to contract. Nearly 100 companies a month were going into liquidation and this situation was not helped by the rapid depreciation of the South African Rand, resulting in the country starting a slow evolution towards deflation – for those who do not understand such terms, this is a situation where prices are falling in real terms while costs continue to rise. Many manufacturers were unable to cope with the flood of cheaper products from South Africa and abroad.

These economic conditions were compounded by the decline in output from the Marange diamond fields that in 2012 had been pumping millions of dollars a day into the local economy, even after “leakages”. The mining sector had been growing rapidly since dollarization in 2009 and the State saw this as a cash cow. They slapped massive fees on the industry and imposed new royalties and conditions. The expansion of the industry slowed and then stopped. Gold production, estimated by some to have been 40 tonnes in 2013 worth $2 billion started to contract and miners, large and small began selling their gold production on informal markets.

Ultimately all these negative elements culminate in the national budget and the new Minister of Finance now finds himself in an impossible situation. Revenues to the State have been declining for some time and the proportion of state revenue that has to be spent on salaries has climbed to over 90 per cent. In desperation and in an effort to cover urgent needs Ministries have been borrowing from the private sector and are not paying their bills or their service providers. The impact of another $1,5 billion in unpaid government commercial debt on top of all the other elements has put the business sector in jeopardy.

Once again I feel desperate, what can we do as ordinary citizens to correct matters? I am back in 1976 and 2008, helplessly watching as our economy “sinks to its knees” and people go through the pain of seeing all they had built up fail and fall in pieces. I still think Mr. Margolis was right in 1976 and for myself I will go to Parliament next week and seek to do what I can do in my own small way to ensure that at least my corner of the garden is productive and well maintained. If we all do that our collective efforts will put our country back on its feet and then perhaps new leadership can start to liberate our broken land from the shackles of poor leadership and lousy policies.

Eddie Cross
Bulawayo 21st March 2014