Eddie Cross's Website

Chaos in Zimbabwe

Today I went from one meeting to another using the main streets in Harare - it was pure chaos. The City had no electricity, the traffic lights at all intersections were not working and the traffic was gridlocked. The Police were nowhere to be seen and even as we sat in the traffic a police car drove past - ramped the pavement and drove though the intersection paying no attention to what was going on around them.

At the Reserve Bank it was the same. They are printing money and creating money in other forms so fast that the inflation rate is no longer calculable. What we do know is that the RTGS rate - that is the rate at which foreign exchange is exchanged in the open market for money transferred by electronic means is moving by the hour. At the beginning of August it was 7 to 1 against the US dollar (after we dropped 9 zeros) and yesterday it was 2 000 000 to 1. Quite a change in 8 weeks! At this rate it will be no less than 10 million to one by next weekend.

Desperate people are queuing for days at the banks and other financial houses to try and get their money out of the system so that they can spend it before it literally melts to nothing. In Gweru last week the main street was almost closed by crowds at ATM's and banks. In Harare literally thousands of people jam every cash outlet. The maximum withdrawal by an individual is $20 000 a day worth US$ 0,001 cents.

The Reserve Bank, faced with the escalating consequences of their own ineptitude are now printing money on plain local bond paper with no security features. The mafia are having a field day and so many counterfeit notes are circulating that people are refusing the new notes. Instead of adopting a carefully crafted plan to overcome these problems and to correct the fundamentals that are driving the system towards collapse, the Governor today simply closed down the RTGS system and I understand even the inter bank system; rendering the only alternative window for payments impassable.

It is illegal to trade in hard currency - you can go to jail for this if you try, it is illegal to change money on the street, you cannot charge a market price for what you sell unless you are willing to risk intervention or worse. Even today there were reports of the government taking action against retailers who were 'over charging'. Business is unable to pay their staff in cash, they pay them by bank transfer and then watch as half their work force is absent all day standing in queues.

Non cash forms of payments are rampant - barter is common, the use of fuel coupons with a face value of about US$30 each is also common tender. The BBC carried a story this week of an auction in Harare where the bids were all expressed in coupons. Most firms are now being forced to sell their goods and services in hard currency - Rand or US dollars even though it is illegal.

Businesses do not bank the money because the Reserve Bank keeps a close watch on any foreign exchange balances in the Banks and simply expropriates them. Crediting the owner of these accounts with local currency at a ridiculous rate of exchange and then using the flow of hard currency to support the life styles of the small elite that is still in charge. At these rates of exchange a luxury, top of the range car costs less than the price of a local cigarette.

Here we are, 4 weeks away from the start of the wet season and we have 2 per cent of our fertilizer requirements in stock. All other inputs are virtually unobtainable. The Reserve Bank is handing out expensive farm equipment to Zanu PF fat cats like sweets to a kindergarden, but they cannot provide fuel or seed or fertilizer or chemicals. It's madness.

Remaining farmers - black and white are being evicted from their farms by Zanu PF heavies such as a Deputy Governor of the Reserve Bank and what is left of the once world class tobacco industry is facing extinction. Dairy farmers, pig farms and fruit estates are all facing illegal invasion and disruption of activity. The Police simply respond to appeals for help by saying that they cannot help because 'it is political'.

Our retail chains are empty, many stores are closed, the wholesalers are no longer functional and industry is running at 10 per cent of capacity. Power supplies are down to about half of demand, fuel is in short supply and spare parts are unobtainable. All basic foods are virtually only available in the parallel market at very high prices. Although government schools have opened their doors and the children have gone to school - no teachers are at work. The universities will not open their doors this term - the final term before vital exams. Business cannot fix prices or salaries - their normal activities are simply frozen in their tracks.

In the midst of this chaos Mugabe went on a 10 day spree to New York to make a speech. The cost of a 20 minute opportunity to denigrate the leading nations in the world, the very people who have fed his population for 8 years, was the cost of taking a Boeing 767 to New York and back via Egypt. The 54 member delegation must have cost at least US$2 million in allowances and expenses while there.

Then on return he wastes another week with no action on the formation of a new government - now 3 weeks since the SADC facilitated deal with the MDC was signed. And remember we have not had a proper government since the 29th March - nearly 7 months. Since Parliament was convened several weeks ago, we have had no government at all. When confronted with the need to make a decision on the allocation of Ministerial portfolios, Zanu PF has been frozen in its tracks like a child confronted with a cobra. Simply not knowing what to do and beginning to realize for the first time that the end of the road is in sight for them.

Even though Thabo Mbeki is no longer the power broker he was after his removal from the Presidency in South Africa, they are terrified of his visit to sort out the impasse because they know that their arguments for a disproportionate share of Ministerial portfolios are not defensible. They cannot hold out for much longer and Mbeki is on his way.

Eddie Cross
Bulawayo, 4th October 2008