By Michael Hartnack
EVEN rudimentary societies had some form of agreed currency, but in Zimbabwe the anarchic regime of Robert Mugabe has succeeded in destroying even that. The value of the currency has cras
hed by 100 000% since Independence in 1980 and now, following the collapse of commercial agriculture, a clutch of banks are in crisis. Mugabe and the new Reserve Bank governor, Gideon Gono, appears to have chosen this moment to try to pave the way for new negotiations with the International Monetary Fund and the World Bank. Their chances appear non-existent without a return to the rule of law and other drastic reforms.
A small find last week by police in Bulawayo reflected the country’s entire economic crisis: several thousand 500 dollar notes lying shredded on a rubbish tip. Until recently $500 was the largest denomination. Now you need two to buy the cheapest roll of sweets. A police spokesman described the note shredding as “economic sabotage”, and added with unconscious humour: “It is shocking that any right-thinking citizen can have the nerve to destroy the currency.”
Similarly, Information minister Jonathan Moyo was furious about the banking crisis: his anger was not directed at the banks, however, but at the correspondents who reported the established facts to British and South African newspapers. “These are the hallucinations of a wishful thinker who has gone crazy,” declared Moyo. For more than 11 days the six banks were excluded from the daily inter-bank clearance of cheques.
Lack of liquid cash left them unable to pay the difference between cheques in favour of their customers coming from other banks, and cheques passed by their customers to remit money into accounts with other banks.Professor Tony Hawkins, a leading consultant, said this crisis threatened to create a gridlock of frozen funds and unpaid inter-bank debts, which could obstruct circulation of money within the already troubled domestic economy. Stores gave cashiers black lists of banks whose cheques were not acceptable. Economist John Robertson said it was a crisis that had long been brewing as inflation soared beyond 600% (on conservative official figures) while the regime kept interest rates down to a fifth of that, to help it pay off local debt of $600 billion. Mugabe has defaulted on external debts of US$3,5 billion, saying, “The IMF can go to hell.”
But sources in Harare believe Governor Gono, until recently himself a prominent banker, has Mugabe’s support in policies aimed at finding a rapprochement with these bodies Mugabe so recently dismissed.
A sudden blitz on cross border traders who come to Zimbabwe to buy relatively cheap goods and on black market foreign currency dealers led to a temporary fall in the parallel rate to $4 500 for US$1. Police began stopping travellers and seizing their foreign currency, quite illegally. Private sector interest rates were temporarily allowed to shoot up. Investment houses that had used borrowed money to buy property, consumer goods, cars, and foreign currency suddenly found themselves unable to service their debts or market these “hedge” assets. There was, as Hawkins put it, a “flight to quality”.
Overnight, one recently launched bank lost 30% of its deposits. Standard Bank, not one of the banks with liquidity problems, reported a 70% increase in balances as nervous depositors rushed to its doors.
The IMF last year instituted moves for Zimbabwe’s formal expulsion in view of the duration and magnitude of its default on debt servicing. International donors withdrew budget support in 1999 when they discovered Mugabe was secretly spending as-yet untold billions on a military adventure in the Congo. Now Mugabe’s plan – supported by South Africa’s Thabo Mbeki – is to get debt restructuring in place, as if the four-year nightmare of farm seizures, the invasion of urban businesses, the collapse of commercial agriculture, of tourism, mining and manufacturing were all a bad dream. Robertson said the first thing the IMF would want was restoration of the rule of law, property rights, a judiciary free of political interference by the ruling party, and an end to terror by state-funded youth militia.
In other words, an end to anarchy.
Meanwhile the regime issued a furious denial that agriculture minister Joseph Made had been embroiled in attempts to seize once more a confiscated commercial farm at Odzi, near Mutare, whose new black owner Made said was in partnership with the white former owner, producing export crops.
“The government will not be duped by Uncle Toms that make themselves willing tools of former Rhodies who are hopelessly trying to hold on to the land,” Made’s office said in a statement. The farm is owned by a company, and Made is trying to repossess it via the parastatal Agricultural and Rural Development Authority. The black employees on the farm, fearful for their well-paid jobs, are violently resisting the Arda newcomers.
Police on Friday spurned the fourth consecutive court order to stop obstructing the publication of Zimbabwe’s only independent daily newspaper, The Daily News, illegally kept off the streets since September 12. The following day police detained Iden Wetherell, editor of the weekly Zimbabwe Independent, and two of his staff, for reporting that Mugabe had commandeered an Air Zimbabwe wide-bodied jet to go on holiday to South East Asia. In this and much else, such apparatus of the state as survives is being used by Mugabe and his ruling elite simply as an instrument for suppressing any challenge.