Business/Finance

Zimbabwe: the Hollow State

Mugabe celebrates his triumph over the economyThree weeks ago Tama Muru from the BBC asked me if I thought Zimbabwe would explode. At the time I said, “No.” Was I wrong?

The situation three weeks ago was this:

  1. The Zimbabwe dollar was worth less than the paper it’s printed on
  2. Zimbabwe is short of everything and produces virtually no food on some of the most productive farmland in the world
  3. 80% of the population depends on the informal sector for jobs and support
  4. Operation Murambatsvina shut down most of the informal sector, left 700 000 homeless and secured the Zimbabwe economy for the Chinese
  5. 3.5 million of Zimbabwe’s most educated and productive citizens are in exile and working in the UK and South Africa
  6. 4 million people need food aid; the average life-expectancy of Zimbabweans is 37 for men, and 34 for women
  7. Official inflation is approaching 3 700% and informal inflation is around 11 000%

The descent from horror to more horror

Since then the following has happened:

  1. Mugabe unilaterally declared that all prices must be halved; the immediate run on goods emptied stores and transferred all goods to the informal sector where prices are much higher than they were
  2. More than 2 000 business owners were arrested for non-compliance with the order even though compliance would put them out of business
  3. Import duties on imported goods have been increased with a view to stopping the cross-border trade with South Africa (and favour China)
  4. Mugabe announced yesterday that he intends remaining president and that mass nationalisation of remaining firms will now take place, including dual-listed international firms like Old Mutual.
  5. Official inflation is approaching 5 000% and informal inflation is … unknown.

How he intends implementing expropriation of foreign-listings is anyone’s guess. What he intends to do with valueless shares is another matter. The result is that the only formally employed people left in the economy are working for the state as teachers, policeman, bureaucrats, street sweepers and the like. Most formal businesses are closed as they have no capital to purchase stock and, in any case, won’t buy goods they are then forced to sell below their cost. The number of refugees streaming in to South Africa numbers around 3 000 per day.

I did say, however, that Zimbabwe is already a failed state.

This truth makes any future intervention into Zimbabwe extremely difficult.

Unwinding the Hollow State

Zimbabwe is an empty but convenient warehouse where people choose to meet for the purpose of trade and exchange. Sellers bring their goods, buyers bring their money. The bulk of that cash arises from donations from exiled Zimbabweans supporting loved-ones at home. There is no productive capacity in the warehouse, it is simply a trade-space. It isn’t even eBay since the warehouse has no tools to facilitate that trade. The future of Zimbabwe is bound by these constraints:

  1. Productive capacity has left Zimbabwe: skilled farmers, engineers, scientists and businessmen are in exile or have had their capital stolen from them – they may no longer have the capacity or interest to start again in a land that has eaten them.
  2. Infrastructure constraints: the general exile of capacity has degraded everything from sanitation, to water to power production, restoring this will take years.
  3. Revenge: the desire to revenge past injustice will fall most heavily on government workers in the police and parts of the bureaucracy that enforced Mugabe’s rules; these are also critical departments for restoring the state – the failure of Iraq was punishing people most able to restore stability.
  4. Informal market efficiency: the extent of informal cash transfers home as well as importation of low-cost goods from China and South Africa undermines any investment into new capacity in Zimbabwe.

The latter point is the most explosive. Zimbabwe’s manufacturing was always less efficient that China’s and was in trouble before. Restarting it will require massive new investment and retraining. There are few entrepreneurs willing to take that on in Africa.

Without exceptionally careful and extremely pro-business legislation few new businesses will be attracted to Zimbabwe except as importers and distributors. The likelihood is that, as the donations back home unwind, Zimbabwe will empty out as people seek work opportunities in South Africa and abroad.

The long-term success of Zimbabwe depends not only on removing Mugabe and restoring the rule of law, but in creating possibly the most business-friendly, liberal economy in Africa. It would almost have to be a tax-free haven with a minimal state.

Many may argue that this will not address the poverty of the masses, but investors have lost more than enough in Zimbabwe already. Much of the Zimbabwe’s assets have already been pledged to Libya and China in exchange for support for Mugabe. The legal status of these agreements is in doubt but further degrades the investment climate.

Any future legal environment must look to the rapid attraction of productive capacity back into Zimbabwe in such a way that overcomes the expense of that investment. Infrastructure is degraded, power is limited, and the costs of investment are high. The market is perilously poor and there is little to attract exiled Zimbabweans home.

Whythawk Ratings has been benchmarking the Zimbabwean informal economy precisely with this in mind. It is essential to know what is already happening – how individuals are solving their immediate needs – before negotiations over the future take place.

Investment is essential if Zimbabwe is not to become an albatross in the Southern African region. That means that investors must have a greater than normal say in what they need to return.

x-posted to whythawk.com

26 replies »

  1. Sometimes egocentric white folks can screw up another culture so badly that it can never be fixed. If Cecil Rhodes (De Beers, British South Africa Company, Rhodesia, etc.), and those like him, had not been so intent on imposing British imperialism and exploitation, countries such as Zimbabwe (Great Zimbabwe in the 13th century) might be better off these days.

    A little closer to home, Native Americans are still reeling from the imposition of a white culture that stole their land and tried to kill them off. Once white supremacists impose their will on the locals, it becomes a little more difficult to honestly blame the natives for all their problems.

  2. Africa remains the white man’s guilty conscience still.

    Recently Lord David Steel visited Kenya and talked to many Mau Mau and retraced his magnificent Father’s steps. The conclusion of the programme I watched was interesting. Britain was sold a line at the time that the problems were caused by the clash of cultures. This was not true. In reality the uprising was about the loss of land to white settlers…

    Next time there is a thrust/drive to settle new environments (space) I hope that the lands conquered are free of native inhabitants.

    The hope for Africa is when finally the blood of the West is mixed to the point where we are all brown and beautiful. When that time is with us there will be no more guilty AID programmes for the African continent generated by the present ‘white’ cultures.

  3. I’m not advocating here, merely questioning. But it seems almost unfathomable that by this point some of Zim’s neighbors aren’t contemplating an aggressive program of regime change. It seems like something this unstable would pose a potential threat to everybody in the area.

    Clearly I’m missing something.

  4. Threebells, nope, doesn’t wash. The past can’t be allowed to hold the future hostage forever. Japan was bombed to oblivion after WWII, so was Germany. Spain was colonised by the Moors. England was colonised by the Romans and its native population brutalised.

    Every single culture, every single people has some claim to having once been a victim. It seems that only in this generation is it used as some sort of trophy to excuse incompetence and charity. I don’t buy it and I don’t accept it. Otherwise there is no helping Africa because they will ALWAYS have the history they have, and so it is a PERMANENT excuse.

    Zimbabwe was a rich nation only ten years ago. These are choices chosen since then. I really doubt you can blame Rhodes, a 19th century man, for the economic decisions of Robert Mugabe 100 years later. And you definitely can’t blame white settlers for the collapse of Great Zimbabwe in the 13th century. That’s outrageous. They didn’t arrive until 300 years later!

  5. Threebells is not wrong…and you only have to look at the native inhabitants of Australia to see what white settlement of their land did to their spirit, belief system and way of life.

    What no one ever talks about is how much the white presence is positively hated by Africans themselves. Many black people want the white man out of Africa. Period.

    Mugabe certainly has his African friends.

  6. Would a man like Robert Mugabe have come to power had it not been for a man like Cecil Rhodes?

    When Cecil Rhodes came into Africa, he did so to make himself wealthy. As a man of unbridled greed, he once implied that he would exploit to solar system for its wealth if he could do so!

    Conversely, when Commodore Matthew Perry sailed into Tokyo Bay in 1854, he represented a country demanding trade with Japan. He didn’t arrive to rape and pillage.

    While the United States did indeed drop atomic bombs on TWO cities in Japan and did occupy the county thereafter, a much more interesting question is why was there an American naval base in Hawaii for the Japanese to bomb in the first place.

    Had the United States not been in Hawaii, would there even have been a global World War II?

    For what it’s worth, the United States was in Hawaii because it stole the islands! The Big Five sugar corporations wanted them and the United States government arranged for a convenient change in regimes.

    It is a little hard to argue (from a rational point of view) that Hawaii was part of John O’Sullivan’s and the Jackson Democrat’s view of Manifest Destiny as proposed about the time the Matthew Perry sailed into Tokyo Bay to demand trade!

    Furthermore, post-World War II America behaved more like a colony of Japan than the other way around. After all, the United States was sending raw materials to Japan and the Japanese were selling Americans finished goods!

    Bought any goods make (not mined) in Africa recently?

  7. Threebells, just a point of clarification about Hawaii. Yes, what you say is true about the Big 5 basically taking over. But there’s also a bit more to the story. Other people were interested in Hawaii as a military base. Russia, for one. In an idea world, Hawaii should have been left alone. But in the real world, that never would have happened. It’s too strategically important.

  8. Frankly, I really don’t think Tsarist Russia was much of threat to the United States at the dawn of the 20th century. Moreover, establishment of a military base by “the land of the free and home of the brave” sure is a p___poor excuse for colonial exploitation of a defenseless island chain. Then, a few generations of sugar-addicted fat kids in the United States may come to be known as “Lili[uokalani]’s Revenge”!

  9. I’m not defending it. I’m just pointing out what happened. Russia’s just one. The Spanish-American war was going on around the time some of this was happening. Trade was expanding and world markets were changing, too. But I suspect the world would be a very different place if the US didn’t get ahold of Hawaii.

    I’m not really sure what this has to do with whythawk’s original article, though. Except to say that similar past events do not necessarily result in similar present conditions.

  10. Threebells, your unfortunate view of your apparently broad historical knowledge is to use it as an excuse for failure. Allow me to summarise your points:

    “You colonised us, enslaved us, victimised us and, after we fought to secure our freedom, left us nothing but your education system, infrastructure and bureaucracy. We will revenge ourselves on you by pillaging the assets you left behind for our use, and killing each other.”

    It sounds a lot like Monty Python: “What have the Romans ever done for us?”

    Victimhood is a lousy excuse for anything. I bet you’d object if I used Jews as an example, so allow me to use Indians (that’s people from India, threebells) in South Africa.

    Indians arrived in South Africa as indentured workers throughout the mid 1800s – almost slaves, really. They were set to work in the sugar plantations of KwaZulu Natal. Soon they set up their own towns and businesses. They were discriminated against as much as anyone during Apartheid. Many people forget that Mahatma Ghandi got his start working as a doctor in South Africa and was confronted with racism for the first time when he was hurled off a whites-only train in Durban.

    Yet, despite this terrible period and on top of a new government dispensation that discriminates as strongly against anyone who isn’t a pure black African, Indian South Africans have similar wealth, education and employment levels as white South Africans. Which is quite high. And a similar population size.

    They could have sat around and whined about the injustice. They didn’t. They got down to work.

    As should anyone else hoping to achieve. It is impossible to tail-gate through life and moan that things should be better and then expect a high standard of living. Unless, threebells, you feel so badly about other people’s self-imposed misery that you’d like to make huge cash donations so that they never have to work?

  11. The white man is no longer the master…and when the underdogs have the boots on their feet it sure does hurt…

    No sane person would attempt to mount a defence of the actions that were carried out in the name of the British Empire surely?

    Victimhood, when taken to extremes, can be silly but you cannot say there are no victims or that victims should not claim justice, recompense or reparations. Germany paid out a fortune in reparations to the victims of its policies during WWII.

    Unfortunately many of our ancestors when they conducted their BUSINESS CAPITALIST affairs gave no thought to the impact their, at the time legal, actions would cause whole swathes of indigenous peoples.

    African countries will get much wrong before they get it right. Can the black man not rule without the white man offering their superior advice? China stands more chance of being listened to by African Leaders than the ex Baas and those who look like him…

  12. Elaine, that’s not the point at all. I’m not defending anyone’s past actions. I’m simply stating that if you base all your future actions on the experiences of the past you get messed up results.

    Look at the middle East. Blood feuds. You shot my great-grandfather so I’m going to shoot your son. And capitalism followed on the tail of religious conversions. It just went through the open door.

    Don’t fall for Mugabe’s bullshit. He may claim that he does what he does because of British colonisation, but that’s just an expedient excuse for his looting the economy. And his people are messed up and so used to brutality that they accept it as logical.

    Some people still have issues about past injustice but when they keep the whips in their own heads then they just open the door for brutal bullies to use those levers against them.

    As James Bond said: once is chance, twice is coincidence and three times is enemy action. If a nation (or a person) makes a habit of fucking itself up then it is a fucked up nation. No point in blaming others. That will do no good at all.

  13. Those with a perpetual inclination to blame the victim are all too frequently those for whom life has come a little too easy. The view that other people should learn how to work is often used as an excuse for further exploitation by those looking for a free ride on the back of someone else.

    If black African males did suddenly rise in the manner of a united Phoenix from the ashes of colonial exploitation, every white conservative male of Northern European extraction would suddenly find chocolate brown corduroy trousers to be an expedient fashion of the day.

    By the way, anyone excessively inclined to tell a group of exploited people that they really do need to get over it, should share their views with the Oglala Sioux on the Pine Ridge.

  14. And I’m a Jewish South African whose grandparents were Polish refugees in the 1930s. So what?

    Not to put too fine a point on it Threebells, but for how long is introspective navel-gazing allowed? One generation, two, three … forever? How long is guilt transferable on to the next generation? One generation, two, three …

    Should we tell the Italians that they’re still responsible for the Carthage massacres in 146BC by Scipio? And how exactly is my telling other people to get off their buts and stop mooching a suggestion that I’d like a free ride?

    Tell me: what’s worse, money you earned yourself out of ability, or money given to you of someone else’s pity?

  15. I am no fan of Mugabe.

    With regard to introspective navel gazing it has not been very long since the black man walked freely on his own land. So generational expertise and skills handed down does not quite come into it yet for these peoples.

    As for the legacy the colonials left. It was an imposed culture of sophisticated farming, trade, religion, business ethos, law and parliamentary system. All from ‘outsiders’. If the Africans have different ideas, cultures and mindsets then, perhaps, what we are seeing is a rejection of a European vision. The African was feeding, clothing, battling, trading, creating, singing, laughing and fighting long before Europe got busy with reforming the continent.

    “And I

  16. Elaine, I still say “So what?” Right of return where? To Poland? I’ve never been there and don’t speak the language. Ditto Israel. This is South Africa. I was born here. I live here.

    Should I sit around and bitch and whine about how hard life has been for my relatives? Or should I take the intelligence I was born with, work on it, develop my reason, and apply my mind to my own well-being?

    Why is a white person who applies themselves and struggles and develops and pushes and becomes Bill Gates an exploiter? Why is Mugabe merely a product of his times and therefore excusable?

    Civilisation, technology, are not products of our genetics. It doesn’t grow on trees. We make it. Every generation born into it comes to it new and works out how to use it. Your parents weren’t born holding cell-phones. I’m sure it hasn’t stopped you using one.

    It’s astonishingly patronising to say that one can’t expect anything more of Africans since the culture imposed on them wasn’t their own.

    We go back to my question about expecting the worst from those who are the most able but excusing and believing those who are the most corrupt. Why?

  17. Would Modern Israel exist today if the Jewish people had not passed down from generation to generation a unique belief system, special cultural tools and a strong sense of blood family ties?

    Having the right of return is HUGE, maybe not in your mind but certainly a straw poll of the Middle East would reveal the feelings that exist regarding YOUR right to return.

    Last time I checked Europe did not practice Lobola and there are many African customs and belief systems handed down that run counter to European ideals and views. To say that African black cultures and dynamics are like the European white conservative culture or liberal culture is to mislead.

    Technology does not give birth to babies yet. If INDIVIDUALS are lucky enough to be educated in their country of birth to a high standard, have exposure to different ideas and move out to inhabitat more ‘broad thinking’ environments then change for those individuals and THEIR families does occur. Tribal blacks are looked down upon by the more sophisticated urban blacks. But it is Mugabe’s tribe that is top in what remains of Zim.

    I do not expect the worst from the most able (and here I do not talk about the past where the evidence proves beyond a shadow of doubt just how unjust capitalist business adventurers were).

    But the most able of what? Business can be evil. It does exploit natural resources, it does build terrible housing on flood plains, it does not offer security for people when they have huge mortgages to pay.

    Life is not a straight choice between the left or the right. One can have both. Healthy business enterprise and care, respect and consideration of the nation’s people. I am not about to crown the capitalist as King.

    Old style capitalism is not something to be proud of!

    I do, however, applaud the Gates and Bransons of this world and think they come in for too much bad press.

  18. Within most modern societies there are only two classes. There is the investment class and there is the working class. The investment class allows their money to work for them. It affords them the luxury of renting politicians to pass laws that favor their position. The distinction is not all that different from master and slave, or prince and peasant.

    The investment class is inclined to get out of sorts when it feels that the working class is not pulling their weight. After all, if the working class goes on strike then the investment class will have to get their hands dirty. And, THAT would be quite unthinkable.

  19. Emmo, happy to assist. Contact me via Whythawk.

    Threebells, you appear to be channelling Marx. I’m not yet sure whether it’s Groucho or Karl, but more information will tell.

    Those labels may have counted a century ago. How do they count now when more than 80% of Americans are both investors and workers? (Through their pensions, if nothing else, threebells.) What about the 65% of the economy that’s now in the services sector? That includes lawyers. As DrD pointed out, they’re the largest donors to politicians. Not investment bankers. And don’t start whining on that the lawyers are merely passing on money from the investment class. Balls. They can do it directly if they want, and lawyers have even more issues of their own they’d like to protect.

    And, and, and, Threebells, lest you think I’ve forgotten where we started… how does any of this have anything to do with Zimbabwe?

    There is no investment class left. Money is so moral a medium that it flees from immorality. Mugabe has “won” his workers revolution. He now controls the entire economy. And the more of it he controlled for the workers, the less of it there was. Now there is nothing.

    Threebells. You have come up with an endless stream of excuses as to why Zimbabwe had no choice but to end up the way it has. You have excused the theft, the violence and belittled investors and capitalists. Tell me … what would you do to restore Zimbabwe to a functioning state with an economy that allows people to earn an income? And let’s make it practical. No historical analogies. No claims that a “People’s Republic” or “Communist Manifesto” will magically end the problems.

    Let’s hear your ideas. Not your excuses.

  20. If they still have to work for a living, they are working class. Most so-called “investors” in the United States have their retirement funds, or equivalents, managed involuntarily. Many have absolutely no idea where their money is going. They wouldn’t know the difference between a hedge fund (private and exclusive) and a mutual fund (regulated and nonexclusive).

    I still question, as I did in the first sentence of my second posting on the subject at hand, whether “a man like Robert Mugabe [would] have come to power had it not been for a man like Cecil Rhodes?”

    The entire thrust of the original Zimbabwe post seemed to consist of little more than whining from a whity-knows-best investment consultant irate about being shut out by an incompetent black nationalist.

    My gut level assessment is that you don’t like to be crossed – especially by a person of color. Much like Cecil Rhodes, you think that you know what is best for all black Africans. Rather obviously, all black Africans do not agree with your myopic assessment and oppose your schemes.

    Frankly, I don’t have a solution for Africa’s problems. As I wrote in the first sentence of my first post on this topic: “Sometimes egocentric white folks can screw up another culture so badly that it can never be fixed.”

    Rudyard Kipling 1899 poem notwithstanding, Africa may remain a stellar example that the white man can create more problems than the white man can solve.

  21. Threebells, the weakness of your economic knowledge is exceeded only by your patronising assessment of myself. Clearly you know nothing about me or my professional objectives.

    You post anonymously, however your claims about me say a great deal about your own view of the world and the chips on both your shoulders.

    My own views and ambitions for the world are clearly stated on my website; not just as a personal statement, but as a professional one.

    I have given my professional opinion on what is necessary for growth and success in Zimbabwe. It has nothing to do with race or creed.

    I asked for suggestions. You have offered more excuses:

  22. You don’t have to believe me. You can scream from the rooftops that I am dumb as a suitcase of rocks and it won’t bother me. Trust me, I really don’t care.

    At the same time, it is not only me with whom you are having a problem. It would seem that a considerable number of Africans are not buying into your scheme. The real problem isn’t economics; it’s trust.

    Robert Mugabe may be the devil incarnate. Yet, even in that capacity he may be more acceptable to large numbers of Africans than yet another self-appointed white savior!

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