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Home | ZimCrisis -- Impact of Invasions on the Zimbabwean Economy

Date: Wed, 31 May 2000 19:04:16 -0700
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From: Zimbabwe Crisis
Subject: ZimCrisis -- Impact of Invasions on the Zimbabwean Economy
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It is a most dubious achievement, but Chenjerai Hitler Hunzvi and his ill-led and grossly misguided mob of ex-combatants (actual or self-designated) probably derive much pride and gratification from their ability to achieve that which others could not. The Rhodesian Front, UDI, fifteen years of war, Marxist-Leninist economic policies, gross fiscal mismanagement, corruption, drought, cyclones and floods, and even Robert Mugabe (not for lack of trying!) were unable to destroy Zimbabwe's economy, albeit that they collectively weakened and decimated it. But in little more than 3 months, Hunzvi and his rabid, racialistic gangs of lawbreakers have brought that weakened economy down to its very knees and to the precipice of permanent devastation. And, in so doing, they have potentially imposed misery and poverty not only upon all Zimbabweans, but in particular upon themselves.

Few will dispute that Zimbabwe needs to effect substantial land redistribution and resettlement. The dispute can only be on the manner whereby it is effected, the time period during which it occurs, and the equitable identification of the beneficiaries of such actions, but not on the need for a redistribution programme. There is absolutely no credible ground which can, however, justify blatant anarchy. There can be no valid justification for unilateral and arbitrary breach of law. (If a law is bad, it must be changed in the manner prescribed in law -- not by civilian self-authorisation of disregard for the law). And no civilised society can condone the destruction of property or the molesting, assault, harassment and abuse of others. The demolition of fences, damage to buildings, cutting down of trees and the sabotage of crops in unforgivable. Even more unacceptable is that the authorities should not enforce the law. That the police should have contended the actions to be "political" and that they are therefore prevented from countering the abuse of law is offensive in the extreme. That the President should tacitly consent to the disregard of law by stating that the invaders of the farms should continue their trespass and remain on the farms, shows a contempt for the constitution he has sworn to uphold, the laws of the country he has sworn to protect, the preservation of rights and of justice, to an extent as must justify his impeachment.

But insofar as those guilty of the farm invasions are concerned, their culpability is not only those of trespass, violence and the destruction of the property of others, it is also the total ruination of an already distressed economy.

First and foremost, it is the destruction of agriculture, which accounts directly for approximately 20 percent of gross domestic product (GDP), and indirectly (through the spending of employee earnings, operational profits, etc.) of an estimated further 12,5 to 15 percent. Thus, directly and indirectly, approximately one-third of all economic activity has, until now, been attributable to agriculture. And yet, thanks to the irresponsible acts of Chenjerai Hunzvi and his cohorts, this will be no more. Under current circumstance, no bank will be willing to provide working capital facilities to any farmer, unless he can provide collateral wholly unrelated to his farm, for all intrinsic value in that farm has been destroyed. It is no longer a saleable commodity.

Similarly, no finance house will be favourably disposed to fund the acquisition of agricultural equipment, and suppliers of farming inputs will be exceptionally reticent on the provision of credit. Without third party funding, most of the farming community (including any ex-combatants who become possessed of farms) will be unable to plant, tend and reap crops next season. Even those few farmers fortunate enough to have all the resources they may need, are so demoralised and demotivated by the threats levelled at them, or from fear of an imminent loss of all they have striven for over decades, that they will be ill-disposed to apply those resources to producing a crop that may well be stolen from them. The inevitable results of the collapse of agriculture provoked by the tyrannical behaviour of the "ex-combatants" include:

* A gross shortage of foreign exchange, with current reserves being less than one day's requirements, dividend remittances frozen, etc., and yet will further decline, for the extent of agricultural exports must not only sharply diminish, but Zimbabwe will undoubtedly have to apply scarce foreign exchange resource to the importation of even more scarce maize and other agricultural commodities which are the mainstay of society;

* Massive unemployment, as many farms discontinue the employment of labour, having been usurped by the ex-combatants, adding to the presently almost 3 million Zimbabwean unemployed;

* Liquidation of many enterprises whose operations are dependent upon the supply of the inputs normally required by the agricultural sector;

* Diminished revenue flows to the fiscus, by way of lesser taxes payable on agricultural profits, reduced sales taxes as a result of decreased spending by those reliant upon agriculture, and lower taxes on sharply reduced profits of the suppliers of agricultural inputs.

* The near collapse of the tourism industry. The international and regional tourist has lost all inclination to visit Zimbabwe. The violence provoked by the farm invasions, and the establishment of a state of anarchy, with an evident total disinclination on the part of the authorities to restore law and order, compounded by the fear of gross discomfort due to shortages caused by the foreign exchange crisis, has deterred almost all from visiting Zimbabwe. Several foreign embassies in Zimbabwe have issued cautionaries to their countries' citizens not to visit this country. The result is yet a further deterioration in Zimbabwean foreign exchange earnings, the imminent failure of many tourist enterprises, the loss of their downstream spending in the economy, and yet further unemployment. Not only the private sector is negatively impacted, but also parastatals such as Air Zimbabwe, the Civil Aviation Authority of Zimbabwe, Zimbabwe Tourism Authority and the like, whilst the State also suffers a massive loss in direct and indirect taxes.

* Zimbabwean business confidence has probably never been at as low an ebb as at present. The consequence is a complete loss of interest in investment, spending by private business and by society at large contained to absolute essentials only, and hence spending being at a minimum. The entire business sector is sinking into decline.

* As a result of the widespread economic ills, very significantly caused by the farm invasions and, when due to other causes, then exacerbated by the invasions, the downturn in business is of such magnitude that many enterprises are unable to service their debts, thereby placing the survival of other enterprises in jeopardy, and putting at risk the continuance of some of Zimbabwe's newer financial institutions, who have not been able to accumulate a substantial capital base.

* The steadily worsening foreign exchange situation has forced an effective depreciation of the Zimbabwean dollar. Although the exchange rate is, in theory, managed by the banks, with the official rate to the U.S. dollar unchanged for 19 months at Z$37,95:US$1, importers are sourcing what little foreign currency as they are able within parallel and black markets, at premiums representing currency depreciation ranging from 30% to over 40%. This is stimulating a resurgence of inflation and hyperinflation levels. Inevitably, interest rates will remain high, and will rise further, crippling more than ever the struggling business world, further deterring investment and preventing economic recovery.

* Most of all, the effect of the farm invasions is, on the one hand, the total discontinuance of foreign investment and the almost total discontinuance of foreign loan funding and, on the other hand, the final and absolute alienation of any and all goodwill and support of the International Monetary Fund (IMF), World Bank, European Investment Bank and like bodies, and of the world's private sector banking institutions. Their perspectives are understandably that, if Zimbabwe now allows unruly mobs to expropriate lands in total disregard for law, with absolute impunity, then next year it will allow like expropriation of the mines, the year after of industry, and shortly thereafter any assets as may be owned by non-residents in general, and whites in particular, no matter how such assets may have been acquired.

* With the decline in agriculturally-generated foreign exchange earnings, and the increase in foreign exchange funded imports of basic commodities, no longer produced by the agricultural sector, Zimbabwe's already very negative Balance of Payments will worsen further. The result thereof must be a very marked real depreciation in the value of the Zimbabwean dollar, despite any spurious attempts of Government and/or the Reserve Bank to contain that depreciation by false and irrational exchange rate "management". Such currency depreciation will provoke yet further massive inflation, further exacerbating the immense hardships suffered by most of the populace. Further inflation will have devastating effects upon the already massive governmental fiscal deficit. These factors must finally destroy any residual inclination or tendency of Zimbabweans to invest into the economy.

* The worsened Balance of Payments must result in a very considerable further deterioration in the availability of petroleum products, the funding of electricity imports, and the import of the essential raw materials required by industry. Yet more liquidations must occur, with consequential yet greater unemployment.

It is, therefore, no exaggeration to lay the blame - fairly and squarely - at the feet of Chenjerai Hitler Hunzvi and Zimbabwe's ex-combatants and their farm invasions for the total, absolute destruction of the economy and the total impoverishment of the Zimbabwean populace.

ZNCC - the Zimbabwe National Chambers of Commerce. Erich Bloch is a respected Economist in Zimbabwe.

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Brief list of helpful sites on the issue:
- Comprehensive news updates -- http://www.1freespace.com/beetee
- Offers of and requests for help for Zimbabweans -- http://pub9.ezboard.com/boffersofhelp
- Commercial Farmers' Union -- http://www.mweb.co.zw/cfu
- Movement for Democratic Change -- http://www.in2zw.com/mdc
- Zimbabwe Democracy Trust -- http://www.zimbabwedemocracytrust.org
- BSAP Pursuit of Zimbabwean Criminals -- http://www.bsaphq.f9.co.uk