FT: Mugabe untouched amid economic ruins
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- Date: Sat, 21 Jul 2007 12:21:21 -0000
Mugabe untouched amid economic ruins
TONY HAWKINS. Financial Times. London (UK): Jul 19, 2007. pg. 8
f Zimbabwe's economic numbers are at all reliable, President Robert
Mugabe's 27-year rule should be nearing its end. Gross domestic
product, already down 40 per cent since the government's accelerated
land reform programme was launched in 2000, is declining this year at
its fastest rate ever - probably about 12 per cent, say economists.
May inflation was 4,530 per cent, with most analysts predicting a June
figure of at least 6,000 per cent. But because the authorities believe
that the release of official inflation figures encourages businesses
to raise their prices, inflation numbers are no longer being
published. Instead, the government statistical office has been told to
develop a new - sanitised - inflation figure that "better reflects the
situation on the ground", said one official. Unofficial estimates put
the June figure at 15,000 per cent.
The government's own figures put the poverty rate at 75 per cent (in
2003), while formal sector unemployment is estimated at 50 per cent.
Ironically, both of these are improving because, according to South
African estimates, 2,000 Zimbabweans enter South Africa illegally each
day. Official estimates put the population at 12m but it is believed
to be substantially less - perhaps as low as 10m. Accordingly per
capita incomes are higher than estimated while unemployment is lower.
When Mr Mugabe took over as prime minister in April 1980, the Zimbabwe
dollar stood at USDollars 1.50. Today, at the official exchange rate
(ZDollars 250 to the US dollar), it is worth less than half a cent,
while at the much more realistic parallel rate of ZDollars 100,000 to
the dollar it is all but worthless.
Yet despite this record of economic failure, it is hard to find anyone
willing to wager on Mr Mugabe's leaving any day soon. Even those who
have been the target of his "price blitz", whereby retailers and
manufacturers were ordered to halve their prices or face heavy fines,
imprisonment and the expropriation of their businesses, are to be
heard defending this action.
The Retailers Association has issued a public statement that admits
implicitly that many of its members were guilty of profiteering;
organised commerce and industry has come out in favour of agreed
"pricing models" that will specify mark-ups for individual companies
and sectors. The trade unions, which bitterly oppose Mr Mugabe, are in
disarray with their members welcoming the price cuts.
Some businessmen, no doubt with an eye on the government's plan to
force companies to sell 51 per cent of their shares to indigenous
Zimbabweans, are anxious to be seen and heard defending the
government.
All of this is grist to the government's mill. It is claiming credit
for cutting the parallel market ex-change rate to ZDollars 100,000 to
the US dollar this week from ZDollars 200,000 a fortnight ago. The
July inflation figure will show a sharp fall, and the authorities
might go back on their plan to suppress publication.
But short-term gains aside, there is no exit strategy from the price
freeze. One garage owner said he lost ZDollars 300m (Dollars 1.23m) in
three days when forced to sell fuel at less than half the price it had
cost to import. Obert Mpofu, industry minister, says his officials are
working on pricing models to make controls "permanent".
However, the dozens of filling stations with no fuel, closed butchers
and fast-emptying shelves in the food stores where staff pack meat
counters with soft drinks are a reminder that time is running out.
Mr Mugabe's threat to take over factories that close or retrench staff
are being countered by industrialists who produce evidence of
applications to the central bank for foreign currency to pay for
essential imports.
Last week, Gideon Gono, governor of the Reserve Bank of Zimbabwe,
admitted publicly that foreign currency was extremely short - the key
priorities being imports of fuel, electricity and basic foodstuffs,
especially maize and wheat.
John Robertson, an economist, says the crunch "cannot be far away",
but some other analysts expect Mr Mugabe to climb down as gracefully
as he can by ordering the central bank to print the money needed to
finance huge consumer subsidies, especially for meat, bread and fuel
while simultaneously relaxing the price freeze to allow companies more
realistic mark-ups than the 5-10 per cent mooted.
Despite the meltdown, there are many winners - those able to exploit
the price cuts that have opened up a Pandora's box of black market
opportunities, the well-connected party "chefs" able to become US
dollar millionaires in just three transactions by buying foreign
currency at the official rate from the central bank and selling it in
the black market, and those close to the seats of power cashing in on
their political muscle.
.
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