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Eric Bloch Column

Zim economy could close for business

By Eric Bloch

FOR a dismally great number of years many of Zimbabwe’s businessmen, numerous of its economists, much of its populace and a multiplicity of entities of the interna

tional community have been foreshadowing the total collapse of the economy.

That collapse could, they claimed, only be averted if there would be a very radical change in the policies, actions and inactions of the government. Some, including this columnist, have consistently believed these prognostications of doom to be exaggerated, through conviction that ultimately that radical change would occur, albeit belatedly, and thereby the economic Armageddon avoided.

But, as yet that change has not occurred, has not even begun, and government’s repeated reactions to the disastrous economic degeneration are to blame others and subject them to draconian abuses of law. As a result, the prophetic predictions of absolute economic failure are rapidly gaining probabilities of fulfillment. Unless government would now, without further prevarication, finally abandon its economically-destructive policies, and embark upon constructive economy-recovery policies, the economy will very soon have to hang up a sign: “CLOSED FOR BUSINESS”.

The evidence of the encroaching absolute economic collapse is by now so pronounced, and the appeals to government to recognise that evidence are becoming so greatly more and more audible that it is difficult to imagine that even a government myopic and deaf to that which it does not wish to see or hear can fail to recognise the imminent final destruction of the economy in the absence of very real policy changes (instead of the facades such as the current National Economic Development Priority Programme, which government believes can delude the masses to believe in forthcoming positive change, whilst in reality the governmental policies remain unchanged).

The reality is that government has not been prepared to develop or pursue any policies which did not emanate from a command economy module. That is one where each and every significant factor of the economy is subject to the infinite and total control of government. The government’s many years of mismanagement of the economy has proven, by the unmitigated economic collapse, to be due almost entirely to gross authoritarian, dictatorial and autocratic, sometimes tyrannical, governance of the economy.

The signs of the approaching final demise of the economy are increasingly apparent.

Some of the most obvious ones are:

* Petroleum has become so scarce that, if sourced within the unofficial markets, the price of a litre has risen within less than a month from $660 to $1 100 and more. This contrasts to the official price of $335 per litre, but none but those supplied by the National Oil Company of Zimbabwe (Noczim) can afford to sell at the official price.

However, the fuel supplied by the state through Noczim, heavily subsidised, is hardly available to business and the man on the street. In the last few weeks, the two service stations in Bulawayo supplying such fuel were confronted by queues of motor cars (and desperate motorists) extending over more than two kilometres. Many have expended almost endless days in those queues, more often than not fruitlessly, for the fuel supplies are exhausted long before they reach the petrol pumps.

The economic man-hours lost are immense, the demoralisation of the motorists is cataclysmic, the forced recourse to black market fuel is inflationary in the extreme. And the scarcity creating these circumstances is due in the almost entirety to non-availability of adequate foreign exchange caused mainly by insufficiency of exports;

* Other scarcities are equally great, or even greater, in the main also attributable to insufficiencies of foreign exchange. Essential medications are continuously on “back-order” at pharmacies unable to access them, there is a nationwide inadequacy of antiretrovirals, most of Zimbabwe’s hospitals, clinics and other healthcare providers cannot maintain equipment operational continuously due to lack of spares.

Bakeries have been unable to obtain adequate supplies of flour because the millers could not obtain sufficient wheat supplies (which have to be imported in the absence of adequate domestic production, caused by government’s appalling continual mismanagement and destruction of agriculture), and there has not been sufficient foreign exchange for wheat purchases in adequate quantities.

Inevitably, government has tried to lie its way out of blame, with repeated false allegations of bakers withholding production pending price increases whilst supposedly holding mountains of flour. Most factories are reduced to production of less than 25% of capacity, be they manufacture of textiles, clothing, furniture, engineered products, pharmaceuticals, food products or other goods, owing to failure to obtain required production inputs in the absence of regular access to foreign exchange;

* The surging exchange rates in the alternative foreign exchange markets, the minimal levels of industrial production, the inadequacies of agricultural production, the gargantuan spendings of government in excess of its means, the extent of printing of money by the Reserve Bank, albeit out of desperation, and numerous other factors directly or indirectly occasioned by government, have driven inflation to over 1 200%, and it is still rising (to such an extent that the International Monetary Fund has forecast inflation at 4 279% in 2007!)

* In panic at the soaring inflation, and reinforced by its long-prevailing, considerable paranoia, government has spewed vitriol upon the business sector, spuriously accusing it of profiteering, exploitationism and other dire “crimes”. (Apparently it is now a crime not to operate business at a loss!)

It has accompanied that vitriol with catastrophically unrealistic price controls and has sought to enforce those controls with tyrannical enforcement of law, including excessive arrest and detention of company directors.

The Minister of Industry and International Trade has threatened withdrawal of trading licences, notwithstanding that the issue of such licences is within the perview of local authorities, and not of government. It is also government’s intent to be more and more authoritarian on private sector pricing, with the establishment of a Price Monitoring Commission and, pending its creation, through the operation of an Interim Administrative Price Stabilisation Mechanism Committee.

In the process, businesses are closing down, more people are becoming unemployed, new investment is increasingly naught but wishful thinking, scarcities are intensifying, the black market becomes evermore virile and inflation continues to rise;

* Parastatal services to the economy and the populace are, with rare exception, declining steadily. Tel*One was unable to fund a US$700 000 debt for satellite services, resulting in extensive deterioration in telecommunication and electronic mail services crucial to the economy’s operations.

The Zimbabwe Electricity Supply Authority (Zesa) announced less than three weeks ago that load-shedding would diminish. Since then, this columnist’s residential area has witnessed an increase in load-shedding from a norm of once a week to four times a week!

So much for the credibility of Zesa statements! The National Railways of Zimbabwe (NRZ) has experienced an increased frequency of accidents and is unable to convey coal output from Hwange on those intermittent occasions when Hwange Colliery Company manages to produce it;

* The state’s domestic debt has risen, in less than nine months, from $14,3 billion to $127,4 billion;

* New investment is continuously talked about by government, but there is little real evidence of such investment. Not only are investors deterred by the autocratic state control of the economy, but also by repeated declarations of intent to achieve indigenous economic empowerment by expropriation and dictate, instead of by facilitation, motivation and incentivisation.

They are also discouraged by the recurrent refusal of government to respect international standards of justice, law and order, and respect for human rights. Most recently that governmental stance was reaffirmed by President Mugabe, he not only condoning, but virtually commending police actions of beating up peaceful demonstrators and onlookers, and of physically abusing those arrested for demonstrating.

If the demonstrators were guilty of breaking the law, or believed to be so, the police had the right and duty to arrest them and bring them to trial, but not the right to “bash” them up and “knock” them about, and to inflict hurt and injury upon them. But the state, instead of disciplining the offending police and taking requisite disciplinary action, commended that abuse of power and disregard for human rights. (Shades of Operation Murambatsvina revisited!)

That is not an environment that attracts investment. Government’s approach to the economy and its economic policies need a dramatic immediate transformation from a command economy into one that is deregulated, market-force driven, facilitated and enabled, or it will very shortly be faced with a country that has no economy at all.

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