Zimbabwe: Recovering the irrecoverable

The results of price fixingAnti-capitalist demonstrators around the world should be celebrating. Robert Mugabe’s government has taken those against free-markets at their word. Over 1 300 business owners have been arrested across Zimbabwe.

Their crime? Raising prices.

For the past decade Robert Mugabe has accepted every tenet of the anti-globalist anti-free-market lobby. He nationalised large commercial farms and gave them to the landless poor. He printed cash and gave it to veterans and the rural destitute. He fixed prices on essential products at low prices to benefit the poor. And, when business owners flouted those rules, he arrested them.

The results have been precisely what market-economists, such as myself, have said would happen. Agriculture collapsed, the Zimbabwe Dollar is entirely debased, essential products are unavailable, and the only real trade takes place in the informal market – now 80% of the economy.

The measure of failed states

By every measure of the term, Zimbabwe is a failed state.

The only party trick that Zimbabwe appears to have avoided is street-protests regarding hyperinflation. Zimbabwe remains stubbornly stable.

I have written on this stability before, and so will only summarise here by saying that massive currency inflows from Zimbabwe’s diaspora in South Africa and the UK is ensuring that most have a safety net. The support of other African nations in cheering Mugabe on has also indicated to his people that they’ll get scant support if they decide to take on his trigger-happy troops.

The question being bandied about now is: how do we stabilise and refloat the country?

Argentina attempted to see off their dance with disaster in the late 1990s by linking the peso to the US dollar. That resulted in currency flight and a shrinking economy. The peso was delinked in 2002.

The South African government is suggesting linking the Zimbabwe dollar to the SA rand in the hopes of stabilising the currency. South Africa already has a currency union with Namibia, Lesotho and Swaziland where the rand is also the local currency. These three countries are all, economically, extremely small. Zimbabwe, for all its current travails, is not.

Zimbabwe has extraordinary natural resources and a highly educated local population. There are also 3 million of their most talented people living in exile and wanting to go home. As soon as the political situation changes they will flock in. A stable Zimbabwe will recover all its losses very rapidly.

Cultural imperialism isn’t limited to the US

Linking their currency to the SA rand poses tremendous risks for South Africa. Money is based on fiat, or trust. The money supply must reflect the underlying value of the economy that it represents. Too little in circulation and you limit growth. Too much and you deflate the value of the currency leading to inflation.

Exactly what is the Zimbabwe economy worth right now? It is almost impossible to know. Putting a political value on that will definitely result in an overvaluation and the knock-on effect of destabilising the rand.

Despite the risks it is essential to link the Zimbabwe economy to something that is stable. Linking it to a western currency, like the US dollar or the EU euro, would be better but is also unrealistic. The weakness of the local economy is too great to use such strong currencies to represent it.

I am apprehensive of using the rand to stimulate Zimbabwe’s recovery but I do have sufficient faith in our independent Reserve Bank governor, Tito Mboweni, to give tacit support for such an initiative.

The long-term result will be a Zimbabwean economy entirely wedded to South Africa. This poses tremendous opportunities for trade and economic growth between the two countries. It also runs the risk of labelling South Africa with the tag of a local hegemon. One I’m not that uncomfortable with. I’d rather see South Africa shaping the future of Africa than Libya.

If the customs union between Namibia, Zimbabwe, Botswana and Mozambique can be used to create a mini-free-trade zone then we really can look forward to some serious Asian Tiger-style growth.

10 replies »

  1. I’ve followed Zimbabwe, as it is now is called, for years probably because I knew a few white Rhodesians in my late teens and early twenties in the UK through Army connections.

    So much of what the White ‘African’ men talked about regarding Rhodesia seems to have come true. I doubt that the individuals were gifted with the powers of prophesy but they warned and feared Mugabe from the outset.

    They had a real and burning hatred for Mugabe which was then extended to all black people. One heard arguments about the lack of intelligence found in Africans, their lack of sophistication, their genetic inferiority when compared to the white race. It was truly scary stuff! When challenged they became angry and pulled the – we know what we are talking about little woman routine – shut up basically and get back to cooking and raising kids.

    Their racism was open and each believed what he said. Their basic message to any and all who would listen…that the black man was not capable of raising himself and needed the patronage of the white man to compete and survive…

    By demonstrating such hatred for people not of their kind (i.e. non-white) no one listened to them about Mugabe. I think many Rhodesians who came to the UK were guilty of this – their attitude stank from the outset.

    When thinking of racism I think of those White ‘Africans’ living in the UK because they had to leave Rhodesia – many having had three generations of their family being born and raised on African soil.

    When thinking of racism I also think of others like them (all the colours – white, black, yellow, brown) who deal in hate and extrapolate the hateful deeds and behaviour of individuals and apply it willy nilly to entire peoples.

    Sometimes, I think that the artificial Countries that colonial powers built with the forced labour of the native inhabitants should no longer be seen as Countries.

    Once the ‘outsider’ leaves it seems that so many of the African Countries created during Colonial times revert back to… Tribal Lands.

    What future South Africa?

  2. Gavin,

    I hear what you’re saying, but when you grab a drowning man and try to save him one of two things is going to happen. If you’re a great swimmer you can save him. If not, he’s going to drown you. Given what you’ve told us all about Mugabe, is there any real hope that Zim can be saved as long as he’s alive and strongarming?

  3. Elaine, short answer: the Cold War is over. Most third-world kleptocracies kept going solely by playing off the USSR against the US and pocketing “aid” money from both. Without that posturing there is less money and that which is available is tied to specific objectives.

    Sam, short answer: Mugabe is like Hussein. Saddam talked a big game, such a big game that – if you believed only half of it – you still had to class him as a major international threat. Then the US goes bludgering in there and finds nothing at all except a whole bunch of chaos.

    Mugabe is the same. He has an awful lot to say. African leaders like him in the same way that South Americans like Chavez, he distracts scrutiny away from their own nefarious doings. But the body is quite dead and, before the disease spreads, it would be useful to operate.

  4. Thank you for the posting.

    I would offer the recent book by Peter Godwin – “When the Crocodile Eats the Sun” for a personal accounting of life in day-to-day Zimbabwe.

    He has another title “Mukiwa, White Boy in Africa” – I can’t comment on it yet as I have just picked it up to read.

    As you mentioned in the posting there is a strong contingent of people living in South Africa that would dearly love to return to Zimbabwe. I have a friend that has been in SA now for more than half his life, but if you asked him – he still thinks of Bulawayo as home…

    I find my self of mixed feelings about the lack of interest the US shows in this region of the world. You rightly noted that if these nations could unite in an economic partnership – it would be a serious union. Perhaps given our (US) recent track record for interfering in other nations – it might be a blessing they aren’t on our radar!

    Sala kahle

  5. Gavin:

    The cold war may be over but the reach from the past is a long, long one…

    Under Mugabe The Warlord his country can feed only a third of its people now…

    Shame on all the politicians in the southern region of Africa who support him and not the opposition in his ‘country’. I guess the people who continue to oppose him and get beaten for their troubles do not registar on the political rader of these new African ‘Statesmen’.

    Why be scared of a tin pot ruthless man like Mugabe? Give the right people the tools and they would go and get him…

    If South Africa cannot show itself to be anti this type of figure then what real hope can any people in Africa invest in their ‘leaders’?

    I despise the ‘quiet diplomacy’ of South Africa’s President.

  6. “Quiet diplomacy”, now there’s something that embarrasses the country. Mbeki’s defenders like to point out that he’s a super-smart intellectual. The rest of us think he’s a policy wonk who’s incapable of translating his “big thoughts” into anything useful.

    I think it may come back to humiliate us later.

  7. President Mbeki needs to be kept out of sight…

    Perhaps, you need to make a list of those African Leaders and Leaders-in-Waiting who are worth listening to and supporting.

    As far as Mugabi is concerned if he had oil then EVERYONE would be looking to get rid of him and install a new regime to ‘protect the people’/steal the oil.