As Zimbabwe prepares for its election, details about the state of its economy and the availability of currency paint a grim picture.
By Peta Thorncroft
WhatsApp works in Harare from time to time; early morning is best. But Wi-Fi costs are about double the same package in Johannesburg.
In most supermarkets there are many items that are imported duty-free from SA, but the government slaps so-called surcharges on everything, and so prices of everyday items, such as soap, are inflated.
There is always an extra unforeseen tax. This means it pays retailers to import stock from SA using “runners”, who charge 30% of the cost of the goods to smuggle them across the Limpopo. This process is also quicker than importing goods legally.
Advertised prices of property in Zimbabwe’s crumbling capital, Harare, are absurd, and there is little for sale, as a mark-up to allow conversion of electronic money into real cash is built into the prices. The local bank account of the seller shows proceeds from the sale in dollars, but those are “Zollars” — as some call electronic transfers — which are at present about half the value of the greenback. And that gap is widening.
Since mid-July, a couple of large trucks loaded with supplies for a major manufacturer in Bulawayo have been stuck in Johannesburg. The trucks cannot begin the journey north until the goods have been paid for.
“The money for this order arrived from donors in New York, but the Reserve Bank of Zimbabwe won’t release the cash.
“So we sit and wait,” the factory’s main shareholder says.
All payments to Zimbabwe exporters are held by the central bank until it is ready to release them — or can afford to release them.
Two weeks ahead of elections on July 30, central bank governor John Mangudya said he had upped the release of foreign currency to banks from $100m to $150m a month.
But despite this there was hardly any cash of any kind — real US dollars or locally produced currency known as bond notes — in banks or ATMs, or in supermarket tills.
In urban areas most retail trade is through electronic money, “swipe” (debit cards) or EcoCash transactions on mobile phones.
The latest Latest statistics reveal that there was a shocking 34% rise in the trade deficit from February to June, with imported goods and services of $2.87bn against exports of only $1.62bn, when inflation is at about 15%.
Nevertheless, a paper prepared by Harare-based Msasa Capital says that following the soft coup d’état that brought Emmerson Mnangagwa to power last November, “Zimbabwe moved from a situation where the only outcome was financial meltdown to a place where there are options”.
So what are the options, given that Zimbabwe imports so much more than it exports?
Economist Tony Hawkins says the ruling Zanu-PF knows what needs to be done. But ahead of the election Mnangagwa has increased most civil service salaries by 17.5%, and army and police salaries by 22%.
“[The country] had a $225m deficit in the first quarter of the year, is digging deeper and deeper into the hole and has no way out of it. Zimbabwe’s debt will be more than 100% of GDP,” Hawkins says.
“We presume that after the elections [the country] will go back to the process started with the IMF [International Monetary Fund] in Lima (in 2016). It will have to reduce [the size of] the civil service, privatise state assets — which are not worth much anyway, even at book value — and abandon export subsidies and cheap loans for gold and tobacco.”
Hawkins says Zimbabwe will have to devalue whatever currency it is using.
But even before restarting talks with the IMF, the country has to pay arrears of $2bn to the World Bank, the African Development Bank and the European Investment Bank. Hawkins says this will take at least six months.
Businessman and lawyer ‘Mutch’ (Muchadeyi) Masunda, a former mayor of Harare, says the huge showing of younger voters in the new voters roll is a positive development, but “many aged under 40 have had their future compromised and can’t remember when last they had formal employment.
“It’s all very well for Mnangagwa to wax lyrical, saying that Zimbabwe is open for business, but where does that business get done? We have watched the determined onslaught on cities by Zanu-PF, which made them dysfunctional.
“For example, the party ensured there has been no town clerk in Harare for the past three years.”
Source: Financial Mail