Zimbabwe – The Final Countdown

After many false alarms regarding Mugabe’s ultimate demise, could the next year finally witness the final dissolution of the Mugabe’s Regime? It goes without saying that one of the factors could be biology – Mugabe’s superannuation – but ignoring that possibility it is most likely the economic dimension that deposes him. What are the numbers behind this bold prediction?

Main picture: Burchell’s zebra in Hwange National Park, Zimbabwe. Photo by Ariadne van Zandbergen

Anybody who has witnessed the steady decline and decrepitude whether of a person, organisation or a country would have been astounded by their resilience even under the direst of circumstances.

In having to perform a due diligence on a Company in Port Elizabeth over a two month period, the manner in which the ultimate collapse was staved off by juggling payments, obfuscation and outright lies prevented the imminent collapse from occurring. By such nefarious means, the company merely postponed the inevitable: they had no cash to pay their creditors and staff. When the end eventually does come, it is with surprising suddenness and is usually triggered by a seemingly minor event which ordinarily a company should easily have overcome.

Carmine Bee-Eater in Hwange National Park

Similarly with one’s body to use a metaphor for a country – in this case Zimbabwe – initially the excess fat is consumed. Ironically this will not be enervating as it is merely discarding what should have been removed on one’s own volition. Then it is the turn of necessary fat. Finally in a last ditch effort to stave off calamity – death by starvation – the protein in one’s muscles is voraciously consumed. Again the end is climatic and abrupt.

So it will be with Zimbabwe.

Let us expose some of the tricks that the Governor of Zimbabwe’s Reserve Bank – ZRB – Mr Mangudya is deploying to forestall the inevitable.

Baboons in the Hwange National Park. Photo by Michael Poliza

Baboons in the Hwange National Park. Photo by Michael Poliza

Delayed interbank transfers

The first example of the ZTB’s intervention or “financial juggling” relates to interbank transfers. The ZRB serves as the conduct for transfers between the various Banks. In this role, one bank will transfer the cash due to another party to the ZRB which in turn will pass the cash on to the recipient bank which only then will make the money available to the ultimate account holder.

Dead trees in Matusadona National Park, Zimbabwe. Photo by HPH Publishing

Dead trees in Matusadona National Park, Zimbabwe. Photo by HPH Publishing

Some months ago instead of the one day’s delay between initiation and receipt occurring, a two day delay was experienced. The following month the delay was three to four days. Then when December arrived and the Civil Service bonuses became due, monies were simply not transferred. Imagine the consternation when debtors claimed that payment had been effected but the creditor claimed non-payment. This placed creditors in financial jeopardy.

Trees in Zambezi National Park, Zimbabwe. Photo by Michael Poliza

Trees in Zambezi National Park, Zimbabwe. Photo by Michael Poliza

This was the tipping point for many struggling companies and individuals. As employers could no longer afford to pay their staff, these unfortunate workers were dismissed often without retrenchment pay to join the 90% unemployed. By reading Cathy Buckle’s blogs from Zimbabwe on the human effect and dislocation of this event, one gets a sense of the human drama and tragedy unfolding. These desperate individuals have been forced to become curb side vendors, selling their meagre possessions in order to stave off imminent starvation.

Elephants in the Zambezi River in Zambezi National Park

Flooding the market with Treasury Bills

How was the pliant Mr Chinamasa able to fund the huge deficits that the ZANU-PF government has been incurring as the government had to obtain the money somewhere? What easier way than to issue Treasury Bills. According to the Minister of Finance, as at 31st December 2015, an amount of $2 billion was owing to local creditors. Pundits contend that this number has been manipulated substantially or plainly misstated by as much as $3 billion. This number has been derived from the attempts to make sense of the government reports on income and expenditure. Even at the $2 billion level, government debt is at 60% of income which is unsustainable let alone the possible level of 250% of national income.

Stone formations in Matobo National Park, Zimbabwe. Photo by Tatyana Kildisheva

Stone formations in Matobo National Park, Zimbabwe. Photo by Tatyana Kildisheva

As a significant portion of national expenditure is now used merely to meet interest payments, can the government ever repay the initial capital amounts? Where does that leave the various institutions which are obliged to hold worthless government debt?

Restricted withdrawals from ATMs

As US$s are required to meet import payments, severe restrictions have been placed on cash withdrawals from ATMs. The limit has been set at US$ 1000. As most of the economy is reliant on cash such as street vendors, taxi drivers and even car guards, this segment which comprises the poorest sector in society has been hardest hit by this measure. As the economy regressed, so did the cash shortage get aggravated. From January the cash withdrawal limit has been limited to one tenth of that amount.

Bridge over the Zambezi River in Mosi-oa-Tunya National Park, Zambia

Bridge over the Zambezi River in Mosi-oa-Tunya National Park, Zambia

The primary causes of shrinking economy

From being fully self-sufficient in foodstuffs in 1980, Mugabe commenced his campaign to evict white farmers after losing the general election to the MDC in 2000. Today 90% of all food is imported. As the nascent industrial sector has also shrunk over the same time frame, exports except for blood diamonds have declined accordingly. With virtually no exports, a trade deficit of US$3 billion (R44.5bn) has had to be covered.

Partly this has been funded by remittances of all the Zimbabweans citizens living outside their homeland like my gardener.

Victoria Falls in the Mosi-oa-Tunya National Park, Zambia. Photo by Ariadne van Zandbergen

Victoria Falls in the Mosi-oa-Tunya National Park, Zambia. Photo by Ariadne van Zandbergen

As far as capital equipment is concerned, all reports suggest that local extemporised repairs have been effected over the years. The power plants are a case in point. With years of inadequate maintenance, most have been running at a fraction of their design capacity resulting in prolonged power outages.

All of these problems have culminated in increased production costs and inadequate output.

Aerial view of Victoria Falls. Mosi-oa-Tunya National Park, Zambia. Photo by Bobbushphoto

Aerial view of Victoria Falls. Mosi-oa-Tunya National Park, Zambia. Photo by Bobbushphoto

 Government overspending

After a calamitous collapse during 2009 in the value of the Zim $ which had become valueless, a government of national unity with the MDC – the Movement for Democratic Change – was established. In the aftremath, the US$ was adopted as the national currency and the Zim$ abandoned. After the dissolution of the this arrangement in 2013, Mugabe again opened the spending taps.

According to Eddie Cross, the MDC MP for Bulawayo South, the government income and expenditure has been as follows since 2009. 

Burchell's zebra and blue wildebeest in Hwange National Park, Zimbabwe. Photo by Ariadne van Zandbergen

Burchell’s zebra and blue wildebeest in Hwange National Park, Zimbabwe. Photo by Ariadne van Zandbergen

Total revenue in USD to the State and the expenditure in the budget (estimate) 

Year 2008 2009 2010 2011 2012 2013 2014 2015 2016
Revenue 0,280 0,900 1,7 2,8 3,8 4,3 3,8 3.6 3,4
Expenditure 0 0,900 1,65 2,74 3,74 4,8 4,8 4,6 4,6
Balance 0 0 0.05 0.06 0,06 -0,50 -1,00 -1,00 -1.20

All figures are in billions of US dollars or a fraction thereof. 2008 relates to the conversion from ZS. 

One can readily ascertain from this that the Minister of Finance, Mr Chinamasa has been deficit financing the budget since mid-2013 when Zanu PF regained unfettered power. The deficit in 2013 arose after Mr. Mugabe ordered an increase in Civil Service salaries by one third together with other costs that had not been budgeted. Although the surplus revenues from 2009 to 2012 were small, they represented a balanced budget minus debt servicing which was not taking place. 

African elephants in Hwange National Park, Zimbabwe. Photo by Ariadne van Zandbergen

African elephants in Hwange National Park, Zimbabwe. Photo by Ariadne van Zandbergen

Mugabe’s Final Solution

Almost like the last hooray, the Governor of the Zimbabwe Reserve Bank has announced a diabolical solution, one that Zimbabwe last witnessed in 2009 with the advent of valueless billion dollar notes. Instead of calling a spade a spade, Mr John Mangudya has produced the ultimate conjuring trick. He has pulled the “Bond Note” out of his black hat. This is an IOU which is not a currency and hence worthless outside Zimbabwe.

Unlike trained magicians, this illusionist has not been able to fool the people of Zimbabwe with his sleight of hand, or is that his silver tongue, having once being fooled by worthless pieces of paper bearing dozens of zeroes in the number, This time they can already envisage the printing presses rolling, churning out another raft of Monopoly Money.

Elephant shaking a tree in Mana Pools National Park, Zimbabwe. Photo by Michael Poliza

Elephant shaking a tree in Mana Pools National Park, Zimbabwe. Photo by Michael Poliza

Sensing a recurrent nightmare, people are already attempting to withdraw all US$s from their accounts sensing that their valuable money will in two months hence be replaced with worthless chits.

First the government “expropriated” the funds of institutional investors by issuing worthless IOU called Treasury Bonds. Now it is attempting the same trick but against the citizens themselves by issuing IOUs in the form of Bond Notes.

In reality, ZANU-PF has been constructing a flimsy house of cards.

It has now reached unsustainable heights.

Even the slightest breath of air will destabilise the whole precarious structure.

In attempting to add extra layers, the structure becomes ever more fragile and susceptible to failure.

Baboons in a tree in the Hwange National Park, Zimbabwe. Photo by Michael Poliza

Baboons in a tree in the Hwange National Park, Zimbabwe. Photo by Michael Poliza

That is where Zimbabwe is positioned currently.

Anticipate the worst.

Or maybe that should read the best as the collapse of this rotten edifice will allow a new sustainable Zimbabwe to be born after one man’s misrule.

Sources – blogs:

Eddie Cross

Cathy Buckle


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