Economic Lunacy

In the past few days we have seen more evidence that the Zanu PF regime led by Mr. Mugabe simply does not have a clue as to how to manage the economy. Having destroyed much of the productive sector they now embark on a headlong rush to take over what is left and completely destroy whatever reputation we had left as a destination for investment in any shape or form.

After months of speculation about taking over 51 per cent of all mining companies, they have announced that they are going to take over 51 per cent of all public companies and any others they think might be attractive as targets. 51 per cent means control of management as well as all corporate policies so foreign and local investors who hold stocks in such companies will have no say over who manages them or what they do with their money.

The local bourse must be worth a fair packet right now and I doubt if there is enough money in the whole country to buy 51 per cent although when they do target a company its share price will collapse in short order as existing investors bail out, convert their money into hard currency and run. To fund this theft of private assets, they are going to create a fund - financed by the proverbial golden goose, the Reserve Bank - which no doubt will simply print money to fund the operation and are making provision for a (listen to this!) LEVY on all companies to finance the purchase of shares by nominated buyers.

I cannot think of any company which would accept such conditions - none, especially when we full well know who the beneficiaries are going to be. Certainly this will now finally sink the mining sector where against all the odds people were still investing, thinking that sanity will prevail. What a collection of goons these guys are, they have nothing in mind but the looting of national assets and a total disregard for the consequences. Other SADC States must take note because if this latest act of idiocy is permitted it will damage the reputation of the entire region as an investment destination.

Not satisfied with this and in an environment where prices, driven by the actions of the State, are doubling weekly, they have set up a Taskforce on Price Monitoring and Stabilisation headed by the Minister of Industry. Yesterday the Minister announced grandly that he was going to 'order' firms to roll back prices by 50 per cent. Just like that! Bread down from Z$40 000 to Z$20 000, fuel down from Z$160 000 or Z$180 000 to Z$60 000. Does he really think that this can be done and not force all firms into liquidation?

Inflation is a symptom of a disease called bad macro economic policy. Such policies are exclusively in the hands of the State. This past week the government has been buying foreign exchange on the illegal parallel markets of the country and paying whatever it took to get the money into their hands. This drove the US dollar into the stratosphere and in an environment where the Reserve Bank allocates not a cent to fuel imports, the private sector relies totally on the parallel markets to secure the funds for imports. They must price their products at a level that will generate enough local currency to buy their next lot of foreign exchange. The margins on fuel are not large and any major shift like last week actually costs the traders money.

It is the Reserve Bank and the Ministry of Finance that are driving inflation. You cannot run a budget deficit of 60 per cent of GDP and not expect the currency to collapse. When it does, business managers have no choice but to price ahead of the tidal wave of inflation or they find themselves swamped and dumped on the beach. In this environment a business can be wiped out in days.

You cannot control inflation by trying to control the symptoms. You must deal with the disease. Obert Mpofu, the Minister in charge of this nonsensical exercise must know better. He is no fool and has been at the helm of the Ministry responsible for industry long enough to know a few business leaders who can advise him. Not at all, he forms a elite group from the security forces to enforce his dictates. We all know what that means - hordes of young thugs just out of some Youth Training Center will descend on businesses where they will arrest and intimidate managers and owners who will be fined or hauled to Court to be charged under some regulation or another.

Coming on top of the new regulations requiring business to 'sell' 51 per control of the business to Party hacks and Chefs, this is too much. I predict wholesale business closures if they follow through with this economic lunacy. I am often told by local leaders in all spheres that the MDC has no hope of ever taking power away from Zanu PF and that our only hope of any sort of change is to 'cut a deal' with Zanu PF and share in the proceeds. We have been criticized by many for taking a hard stand on any compromise with Zanu PF. We hold to the view that the people must decide who will govern them and no body else. We certainly will not take any short cuts to power, which might compromise that position.

I remain more convinced of the rightness of that policy today than ever. Zanu PF has to go, lock stock and barrel, no compromises. They are corrupt, incompetent and deceitful. They have learned nothing from 27 years in power and I cannot see any one of them being worth saving to serve in a new government. I think they have left this last grab of assets too late - their days are done and the SADC has had enough of their shenanigans.

Mbeki will have to broaden the basis of the talks in Pretoria to include everything that Zanu is currently doing in its last ditch stand. The amendments to the Constitution, the banning of MDC political activity, the arrest of activists, the continuing land grab, the new asset grab in the guise of indigenisation, the printing of money and the run away budget deficit. The food crisis and the humanitarian needs of million who are starving.

The largest miller in the country has had no maize delivered to it for a month and is completely out of stock on wheat and oil. If SADC does not act soon, this ship might sink completely and then we are faced with a salvage operation - not a simple stabilisation and recovery programme.

Eddie Cross
Bulawayo, 27th June 2007