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What went wrong for business in 2005?

THE year 2005 could be described as one of the most difficult for businesses in Zimbabwe. Shortages of foreign currency, fuel, power and water all contributed to massive loss of production and at times the closure of companies. Luxon Zemb

e, Zimbabwe National Chamber of Commerce (ZNCC) president, spoke to our senior business reporter, Shakeman Mugari on the state of business in 2005 and next year’s prospects.

Mugari: How would you describe the year 2005 from a business perspective?

Zembe: I would say this was the most difficult year for business in Zimbabwe. We saw the whole thrust of the turnaround failing to achieve its goals. The minor gains of 2004 were reversed this year. Foreign currency supply almost dried up to the extent that at one time the auction system could only meet 3% of national needs. The inflation rate also increased drastically while interest rates climbed up to more than 450%. From a GDP point of view, we are still in the negative.

Mugari: What other problems did business face this year?

Zembe: There was a shortage of everything. There was no fuel, water and power. Power outages actually intensified while water became a scare commodity with other areas going for more than three months without water.

Mugari: What caused all these problems?

Zembe: This was an election year. And we must realise that during an election year politicians put everything aside to win an election. This is one of the most unfortunate aspect of Zimbabwean politics — the economy does not take centre stage in an election. In other countries leaders are evaluated on the basis of the state of the economy, the standards of living and employment. Voters in other countries use the standard of education, health and transport system to choose their leaders. That is why I don’t believe we have a leadership in this country.

Mugari: What do Zimbabweans use to evaluate their leaders?

Zembe: Well they focus on relationships, associations and tribal issues. There is a culture of the politics of hatred in this country. That is why we don’t elect leaders in this country, we elect comrades. We put personal interests at the forefront. People are forced to look at their personal interests. They believe if they vote in so and so they will lose their land or property.

Mugari: What were the other causes of the crisis?

Zembe: We had wrong people occupying land. That is why we failed to raise agricultural production despite pouring billions into the sector. We have people without skill, resources and passion for agriculture. They are occupying the land for political reasons. That is why after free land they want free tillage, free fertiliser and free seeds. They want everything free. In the end they are only working to feed themselves and not the nation. They are merely subsistence farmers.

Mugari: So what is to be done?

Zembe: We need to go back to the Utete (Charles) report which recommended that we resettle these people. I am not saying people should be removed from their land. What I mean is that there must be a clear distinction between land for resettlement and for business. That did not happen when we started the land reform and we are still suffering from those effects of omission.

Mugari: How about government policy, did it have an impact?

Zembe: Oh yes, it did the damage. In August 2004 President Mugabe said the reform had ended but we have witnessed fresh farm invasions. We have seen massive disturbances on productive farms. The fiscal and monetary policies were not compatible. We also had these command policies that are killing the economy. We still have price controls on commodities like sugar and fuel. As for fuel, we have four prices that are being used.

Mugari: What are those prices?

Zembe: We have $11 000 as the price for the privileged farmers who then sell it on the black market instead of using it to till their land. We have $23 000 as the price for the lucky ones who have contacts in government. We have the US$1 as the price for the rich who can afford to get foreign currency. Then we have the price for the desperate ones which ranges between $100 000 and $150 000 per litre.

Mugari: Other policies you could say also affected business this year?

Zembe: Money supply growth. Government kept on printing money to fund its bloated debt. The RBZ also contributed to the inflation surge with its quasi-fiscal actions. It was pouring money into parastatals and local authorities like confetti. That pushed inflation to new heights of over 500%. It is clearly unsustainable.

Mugari: President Mugabe declared 2005 a year of investment. Looking back, would you say there was any investment?

Zembe: That has not materialised. We of course have a few Chinese here and there but that is for their own benefit. In real terms we have not seen any investment whether local or eternal. There were some mergers and acquisitions but that is not real investment. It is just the same money changing hands locally. That it not wealth creation. So in terms of luring investors, the country failed to perform.

But how can we get investment when we are still ranked so lowly in corruption and political risk terms? Our policies are not clear. We don’t have a policy of indigenisation in the mining sector. We are still invading farms too.

Mugari: If we had all these biting problems, how did other companies survive?

Zembe: That was probably out of their ingenuity, perseverance and resilience. That is why we say with proper policies this country would do wonders.

Mugari: But government says they are part of “economic saboteurs” working to undermine the national interest?

Zembe: Now that pains me. It pains me to see businessmen and leaders who have struggled this far being victimised and traumatised. The government forgets that these are the same people who have kept the economy running all these years, they deserve respect and we should treat them with love. Even politicians should be grateful to have such patriotic businesspeople in this country. They have saved this country from civil unrest.

Mugari: What do you think is in store for business in 2006?

Zembe: We could start on a positive note if what Minister Murerwa said about price controls is going to be implemented. He said we would have a market-driven economy but that remains a statement of intent instead of action.

It is the implementing side that lacks in this country. They should implement policies with speed like they do with taxes. When announcing taxes Murerwa will say “with effect from today”. That is the speed that we want on other policies.

Mugari: Minister Murerwa in his budget statement says 2006 will be a better year, especially for agriculture.

Zembe: Those predictions are based on false assumptions that agricultural production will increase. But the situation on the ground shows that this season is probably the worst in terms of preparation. It would be a miracle if we manage the 28% growth that he talks about. It’s impossible. Irrigation equipment has been vandalised and there are no inputs.

Mugari: What about our bilateral relations?

Zembe: They are at their worst currently. Murerwa and (RBZ governor Gideon) Gono are saying we should engage the international community but they are being attacked left, right and centre by other government officials. It’s OK for countries to have differences but our government has gone further than that to create enemies. They forget that the economy is built on a political platform.

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