Zimbabwe Conflict

Economy of Zimbabwe

The Economy of Zimbabwe is collapsing under the weight of economic mismanagement, resulting in 85% unemployment and spiraling hyperinflation. The economy poorly transitioned after Robert Mugabe's leadership, deteriorating from one of Africa's strongest economies to one of the world's worst. Inflation has surpassed that of all other nations at over 2,000,000% (although it is impossible to calculate an accurate value), with the next highest in Burma at 39.5%. The government has attributed the economy's poor performance to ZDERA, a US congressional act hinging debt relief for Zimbabwe on democratic reform, and freezing the international assets of the ruling class. It currently has the lowest GDP real growth rate in an independent country and 3rd in total (behind Palestinian territories.)

The country has reserves of metallurgical-grade chromite. Other commercial mineral deposits include coal, asbestos, copper, nickel, gold, platinum and iron ore. However, its ongoing political turmoil and the world's highest rate of AIDS infection have greatly hampered its progress. Mugabe's policies towards land reform have led to internal upheaval and population displacement, high inflation, and an inability of the country's citizens to feed themselves.

1980’s

Following the Lancaster House Agreement in December 1979, the transition to majority rule in early 1980, and the lifting of sanctions, Zimbabwe enjoyed a brisk economic recovery. Real growth for 1980-1981 exceeded 20%. However, depressed foreign demand for the country's mineral exports and the onset of a drought cut sharply into the growth rate in 1982, 1983, and 1984. In 1985, the economy rebounded strongly due to a 30% jump in agricultural production. However it slumped in 1986 to a zero growth rate and registered negative of about minus 3% in 1987 primarily because of drought and foreign exchange crisis faced by the country Zimbabwe's GDP grew on average by about 4.5% between 1980 and 1990.

Infrastructure and Resources

Zimbabwe has adequate internal transportation and electrical power networks. Paved roads link the major urban and industrial centres, and rail lines managed by the National Railways of Zimbabwe tie it into an extensive central African railroad network with all its neighbours. In non-drought years, it has adequate electrical power, mainly generated by the Kariba Dam on the Zambezi River but augmented since 1983 by large thermal plants adjacent to the Wankie coal field. As of 2006, crumbling infrastructure and lack of spare parts for generators and coal mining means that Zimbabwe imports 40% of its power - 100 megawatts from the Democratic Republic of Congo, 200 megawatts from Mozambique, up to 450 from South Africa, and 300 megawatts from Zambia.

Independent analyst put the inflation rate at +165 000% a figure which critics claim is far less than the actual inflation rate. Parity rates of measurement show point towards a figure of close to 500 000% but these cannot be cited for obvious reasons. The use of oppressive laws as manifested in the likes of the infamous National Price and Income Commission has seen the country at the bottom list of the of the World Bank Index. Recently the President of the republic signed the Empowerment bill whose effect is to transfer ownership from all foreigners into the hands of the local people something that has already had its toil on the DI. The telephone service is problematic, and new lines are difficult to obtain.

Agriculture was once the backbone of the Zimbabwean economy. Due to large scale eviction of white farmers and the government's land reform efforts, this is no longer the case. Reliable crop estimates are not available due to the Zimbabwe government's attempts to hide the realities following the evictions. The ruling party banned maize imports, stating record crops for the year of 2004.

The University of Zimbabwe estimates that between 2000 and 2007 agricultural production decreased by 51%.

Maize was the country's largest crop prior to the farm evictions. Tobacco was the largest export crop followed by cotton. Poor government management has exacerbated meager harvests caused by drought and floods, resulting in significant food shortfalls beginning in 2001. The land redistribution has been generally condemned in the developed world. It has found considerable support in Africa and a few supporters among African-American activists, but Jesse Jackson commented during a visit to South Africa in June 2006, "Land reform has long been a noble goal to achieve but it has to be done in a way that minimises trauma. The process has to attract investors rather than scare them away. What is required in Zimbabwe is democratic rule, democracy is lacking in the country and that is the major cause of this economic melt down.

2000–2008

In recent years, poor management of the economy and political turmoil has led to considerable economic hardship. The Government of Zimbabwe's chaotic land reform program, recurrent interference with, and intimidation of the judiciary, as well as maintenance of unrealistic price controls and exchange rates has led to a sharp drop in investor confidence.

On November 1, 1989 a former government minister in Rhodesia, Denis Walker, produced a paper in London for the Conservative Monday Club's Foreign Affairs Committee on Land Reform in Zimbabwe. In his last paragraph he stated that "once the land has been redistributed, the commercial farms will be broken up, the remaining white farmers reduced by exile or imprisonment; Zimbabwe's government, already morally bankrupt, will decline towards economic collapse."

Between 2000 and December 2007, the national economy contracted by as much as 40%; inflation vaulted to over 66,000%, and there were persistent shortages of foreign exchange, local currency, fuel, medicine, and food. GDP per capita dropped by 40%, agricultural output dropped by 51% and industrial production dropped by 47%.

Direct foreign investment has all but evaporated. In 1998, direct foreign investment was US $400 million. In 2007, that number had fallen to US $30 million.

Billions were spent in the country's involvement in the war in the Democratic Republic of the Congo. Price controls have been imposed on a wide range of products including food (maize, bread, steak), fuel, medicines, soap, electrical appliances, yarn, window frames, building sand, agricultural machinery, fertilisers and school textbooks.

Mugabe's supporters maintain that economic hardship has been brought about by Western-backed economic sanctions instituted through the United Nations. However, the only sanctions in place are personal sanctions against about 130 senior Zanu-PF figures; there are no sanctions against trade or investment with Zimbabwe.

As of February 2004 Zimbabwe's foreign debt repayments ceased, resulting in compulsory suspension from the International Monetary Fund (IMF). This, and the United Nations World Food Programme stopping its food aid due to insufficient donations from the world community, has forced the government into borrowing from local sources.

Zimbabwe began experiencing severe foreign exchange shortages, exacerbated by the difference between the official rate and the black market rate in 2000. In 2004 a system of auctioning scarce foreign currency for importers was introduced, which temporarily led to a slight reduction in the foreign currency crisis, but by mid 2005 foreign currency shortages were once again chronic. The currency was devalued by the central bank twice, first to 9,000 to the US$, and then to 17,500 to the US$ on 20 July 2005, but at that date it was reported that that was only half the rate available on the black market.

In July 2005 Zimbabwe was reported to be appealing to the South African government for US$1 billion of emergency loans, but despite regular rumours that the idea was being discussed no financial support has been obtained from South Africa.

The official Zimbabwean dollar exchange rate had been frozen at Z$101,196 per U.S. dollar since early 2006, but as of 27 July 2006 the parallel (black market) rate has reached Z$550,000 per U.S. dollar. By comparison, 10 years earlier, the rate of exchange was only Z$9.13 per USD.

In August 2006 the RBZ revalued the Zimbabwean Dollar by 1000 ZWD to 1 (revalued) dollar. At the same time Zimbabwe devalued the Zim Dollar by 60% against the USD. New official exchange rate revalued ZWD 250 per USD. The parallel market rate was about revalued ZWD 1,200 to 1,500 per USD (28 September 2006).

In November 2006 it was announced that sometime around December 1 there would be a further devaluation and that the official exchange rate would change to revalued ZWD 750 per USD. This never materialized. However, the parallel market immediately reacted to this news with the parallel rate falling to ZWD 2,000 per USD (18 November 2006) and by year end it had fallen to ZWD 3,000 per USD.

On April 1, 2007 the parallel market was asking ZWD 30,000 for $1 USD. By year end, it was down to about ZWD 2,000,000. On 18 January 2008, the Reserve Bank of Zimbabwe began to issue higher denomination ZWD bearer cheques (a banknote with an expiry date), including $10 million bearer cheques - each of which was worth less than US $1.35 (70p Sterling; 0.90 Euro) on the parallel market at the time of first issue. On April 4, 2008 the Reserve Bank of Zimbabwe introduced new $25 million and $50 million bearer cheques. At the time of first issue they were worth US$0.70 & US$1.40 on the parallel market respectively.

On May 1, 2008, the RBZ announced that the dollar would be allowed to float in value subject to some conditions.

On May 6, 2008, the RBZ issued new $100 million and $250 million bearer cheques. At the date of first issue the $250 million bearer cheque was worth approximately US$1.30 on the parallel market. On May 15, 2008, a new $500 million bearer cheque was issued by the RBZ. At time of first issue it was worth US$1.93. In a widely unreported parallel move, on May 15, 2008, the RBZ issued three "special agro-cheques" with face values $5 billion (at time of first issue - $19.30), $25 billion ($96.50) & $50 billion ($193). It is further reported that the new agro-cheques can be used to buy any goods and services like the bearer cheques.

Government Response

The 2007 Empowerment Bill to increase local ownership of economy is being drafted for presentation to parliament in July 2007. It is signed into law by President Mugabe on 7th March 2008. The law requires all White or foreign owned business to hand over 51 percent of their business to indigenous Zimbabweans. Many economists predict this will plunge the country into deeper economic woes.

In response to skyrocketing inflation the government has introduced price controls, but enforcement has been largely unsuccessful. Police have been sent in to enforce requirements that shopkeepers sell goods at a loss. This has resulted in hundreds of shop owners being arrested under accusations of not having lowered prices enough. Because of this, basic goods no longer appear on supermarket shelves and the supply of petrol is limited. This has diminished public transport. However, goods can usually be had for a high rate on the black market.

How the UN is feeding tyranny in Robert Mugabe's Zimbabwe

TheTimes
March24,2008

MichaelHolman

Here we go again! Seven years after the World Food Programme helped to save
Robert Mugabe's political bacon by unilaterally and unconditionally deciding
to feed his starving people, the UN agency is making the same mistake.

At the end of 2001 Zimbabwe's leader was in trouble. Presidential elections
were looming. The consequences of his land grab were becoming clear. After
denying that hunger was imminent, Mugabe finally admitted that half a
million Zimbabweans faced famine.

At this point the WFP stepped in to feed the country - but without an
insistence on minimum conditions, such as an end to the land policy which
created the crisis that donors sought to alleviate.

The outcome of the operation was predictable: food aid became
institutionalised as the land grab continued. The WFP has fed millions of
Zimbabweans and Mugabe has been cushioned from the consequences of his
policies.

Seven years later history repeats itself. Mugabe is fighting for his
political life. Elections are imminent. And he has been forced to admit that
his country is starving. But again, help is at hand from the same source.

In a statement last week the WFP announced that it "plans to complete this
month's food distributions in Zimbabwe earlier than usual to avoid any
overlap with the final run-up to the presidential and parliamentary
elections on 29 March". In other words, in time for Mr Mugabe to use the
resources of the State to distribute the food as he deems fit.

The WFP claims that it has "zero tolerance for political interference . . .
in the distribution of its food assistance," a claim as pompous as it is
hollow. For a start, it should be unacceptable to the WFP that reporters
from the very countries who pay for the food should be banned from Zimbabwe.
It is also unacceptable that election monitors are similarly proscribed.

No one underestimates the UN agency's predicament. What if Mr Mugabe
responds to a WFP attempt to impose conditions by choosing to let his people
starve rather than accept foreign reporters, and the presence of independent
monitors?

But there is another question to ask: If Mr Mugabe's political life is in
the balance, could these terms prove the straw that will break his back? If
he agrees, the better the chance that democracy prevails on March 29. If he
refuses, might this tip the scales towards his overthrow?

Selecting and applying the conditions that should accompany food aid is no
easy task. But the record suggests that the naïve and unconditional
generosity the WFP has displayed has done long-term harm, whatever
short-term good.

---

Zimbabwe Opposition Leader

Opposition leader Morgan Tsvangirai held his last election rally in Harare Sunday and promised that a new Zimbabwe, driven by love and not fear, is on the horizon. Mr. Tsvangirai, enjoying a huge surge of popularity around the country, is standing against President Robert Mugabe in elections next Saturday. Peta Thornycoft reports for VOA from Harare.

Tsvangiriai, founding president of the Movement for Democratic Change, told about 20,000 supporters gathered on the edge of the city they should go out and vote.

The rally was held in an open field because the police denied the MDC access to any of the city's stadiums, according to party officials.

Nevertheless, the rally was well organized. People sang popular MDC songs, some of which mock Mr. Mugabe and his colleagues in the ruling ZANU-PF party.

Tsvangirai told the crowd that Zimbabweans are beyond fear now. He said the road for the opposition has been long and painful, but that victory is at hand.

"We will stand together, we will stand for food, we will stand for jobs, for justice," he said. "We will stand for freedom as one, for a new Zimbabwe. We will line up at those polling stations and we are going to vote in our millions."

Tsvangirai said people want jobs, food and a decent life, and that the current economic chaos was caused by bad government.

He praised President Mugabe for delivering Zimbabwe from colonial rule, but said it was now time for the 84-year-old leader to go. He said that so many people would vote for the MDC next Saturday that any rigging and cheating would be overcome.

"We expect the enemies of justice to engage in every trick in the book. We are ready for them," Tsvangirai said. "We are ready for those that would like to subvert the people's victory."

On Saturday, during rallies in high density suburbs in Harare, President Mugabe blamed businessmen for what he called exorbitant prices.

He also said that after the elections he would nationalize British-owned companies and ensure that new legislation giving majority ownership of all businesses to black Zimbabweans is quickly implemented.

Zimbabweans are, for the first time, voting in four elections simultaneously including presidential, parliamentary and local government contests.

On Sunday, civil rights leaders briefed a group of observers from the Southern African Development Community or SADC.

Western observers are not being allowed to monitor these elections. And the government says it will not allow any white Western journalists to cover them.