Winston Churchill’s
famous description
of Russia made
during a radio
broadcast in October 1939
applies equally well to the
Zimbabwe of today.
“I cannot forecast to you the
action of Russia. It is a riddle,
wrapped in a mystery, inside an
enigma,” he said.
Replace “Russia” with
“Zimbabwean economy” and you
get the picture.
Where else do you have
hauliers investing in new trucks,
warehouses
being expanded,
new office parks
being erected,
and emigrants
returning when
the economy,
according to the
figures, is currently in free-fall?
The mystery is deeper than
that: between 2009 and 2011
the Zimbabwean economy grew
faster than that of Hong Kong.
Between 2009 and 2011 GDP
growth averaged more than 7%.
By comparison, Hong Kong’s
economy grew 5%.
From 1993
until 2013,
South Africa’s
growth rate
has averaged
3.2%.
Zimbabwe’s
growth
spurt was
fuelled by the
“dollarisation”
of the currency
following
a period of
hyperinf lation.
Johns Hopkins University
economist Steve Hanke
calculated that, by November
2008, Zimbabwe’s annual
inf lation was the second highest
in history, at 79.6 sextillion
percent.
Hanke calculated that prices
were doubling every 24.7 hours.
After dollarisation in January
2009 inf lation immediately
fell – to 2.3% by the end of the
month – and then stabilised.
All Zimbabwean money held
in the banks or in cash became
worthless overnight.
This left importers who had
cash set aside for duties suddenly
having no money in the bank.
There is still no money in the
bank.
Everyone
you talk to
in Zimbabwe
mentions the
liquidity crisis.
By the end
of 2013 there
were simply not enough dollar
or rand notes (and R5 coins) in
circulation to keep the economy
moving.
It is estimated that individuals
withdrew over a billion dollars
in cash before and after the July
31 elections in which president
Robert Mugabe and his Zanu
PF party
were declared
winners.
It sparked a
cycle whereby
banks did
not have the
funds to keep
businesses
af loat, and as
a result the
companies
could not
pay staff and
retrenchments followed across
the board.
Investment is also affected as
banks are unable to offer longterm
lines of credit due to the
short-term nature of deposits.
Zimbabweans prefer cash in
the hand to deposits in the bank.
The prospects are not good –
on paper.
According to data obtained
from the Massachusetts
Institute of Technology’s Atlas
of Economic Complexity,
Zimbabwe now exports far fewer
types of goods than it did in1995
when there were 759 products
shipped out of the country.
By 2010 (the latest year for
which data is available), the
number of products had declined
to 604.
What has kept government and
the economy af loat, according
to the US-based Cato Institute,
is a combination of a 1800%
rise in tax collections in the
three years after dollarisation, a
US500-billion
International
Monetary
Fund grant
in 2008, and
loans from
the Chinese
government.
Government
expenditure
is, however,
outstripping
revenue
growth and it appears that
creditors are tightening their
purse strings.
Back to the enigma.
Despite all these challenges,
FTW was encouraged to visit
Zimbabwe and to run this
feature because the companies
that are operating in the country
remain optimistic.
What we found were
expatriates – both white and
black – who have returned
because Zimbabwe offers better
prospects than South Africa,
Europe or Australia.
There are also companies
making significant investments
in the logistics sector.
And, the
leafy streets in
the upmarket
suburbs of
Harare are
better kept
than those
in any other
African
capitals – and
much of South
Africa.
But the
streets are filled with a growing
army of unemployed, and
freight volumes ref lect a fall in
consumer spending.
A significant proportion
of that spending has headed
onto the streets as government
tariffs designed to support local
manufacturing make smuggling
more profitable.
Zimbabweans always find a
way.
INSERT 1
A significant proportion
of consumer spending has
headed onto the streets
as government tariffs
designed to support local
manufacturing make
smuggling more profitable.
INSERT 2
Expatriates — both white
and black — have returned
because Zimbabwe offers
better prospects than South
Africa, Europe or Australia.
CAPTION
Another enigma – who buys Cheetah flags in Harare?
