Hint of economic optimism takes root in Zimbabwe

Then he called up some of the young men who used to work for him; he laid them off years ago, after government-imposed price controls eliminated his ability to pay them. He set them to work cleaning up the area at the back of the store where he had once planned to build a café, before Zimbabwe’s political and economic crisis eviscerated his business.

And then Mr. Mhende, 60, called the bank to discuss a loan, so he can restock his shelves. The bank, which hadn’t taken his calls in a year, told him to come in for a chat.

“I know it will be difficult to get the products to restock,” he said. “But I think things are looking up.”

All of this has happened since Sept. 15, when President Robert Mugabe signed a power-sharing deal with the opposition Movement for Democratic Change (MDC), ceding some of his control of the country for the first time in nearly 30 years.

Under Mr. Mugabe’s increasingly autocratic and violent rule, Zimbabwe’s once-vibrant economy has been demolished. Inflation is officially estimated at 11 million per cent, but is more likely 40 million; the agricultural, manufacturing and tourism sectors are moribund; a third of the population has fled over the borders and half of those who remain are now surviving on emergency food aid. And the new political setup is far from settled: The two sides have been locked in bitter talks over how to split up key cabinet ministries and show little sign of being able to work together amicably.

Nevertheless, the deal they signed has engendered a flowering of optimism in Zimbabwe, especially among business people chafing to revive an economy frozen like a fairy-tale heroine. “I’m very optimistic,” said Shingi Munyeza, head of ZimSun. “It’s going to take a lot of positive engagement, but there is now political will, which was absent in the past.”

He noted that historically, in other African countries that have turned around after crises, the key ingredients have been a change of political direction, physical and institutional infrastructure that is still intact, good human capital and abundant resources. Zimbabwe, he said, has all of these: one of the best-educated populations on the continent; still-viable banking and other institutions; gold, diamonds and platinum, plus great tourist destinations.

“We have a critical mass of people who can turn us quickly to where we should be going,” Mr. Munyeza said.

Yet the challenges are daunting. How can the new government put a check on inflation that is so preposterously high and re-inject value into a now-worthless currency? How can it create an environment that will lure back investors with their desperately needed capital? And how can foreign donors – both multilateral and the international financial institutions – be persuaded to take a chance on Zimbabwe when Mr. Mugabe, who oversaw the destruction of one of Africa’s strongest economies, remains the president?

Economists say the new government must quickly end its squabbling and immediately stop the Central Bank from printing any more money; at the same time, the treasury must halt all off-the-books payments for items such as cars for Mugabe loyalists.

“They will have to restore the credibility and discipline of the Central Bank and financial sector as a whole – they have to stop the money-printing madness,” said Tony Hawkins, a professor of economics at the University of Zimbabwe. “It is going to take some time for hyperinflation to come down.”

At the same time, the government desperately needs some real money – foreign exchange – to pay its bills, including the civil service payroll, and to try to rein in the crazed inflation rate. But the foreign exchange will be difficult to acquire: The only source is multilateral donors, who, while cautiously congratulatory about the power-sharing deal, are not rushing into Zimbabwe with cheque books in hand.

“They will need structures of accountability and to restore good governance; at the moment the structures are not there at all,” Prof. Hawkins said.

The International Monetary Fund is the likely source of balance-of-payments support, but Zimbabwe has been blacklisted by the IMF since 2000. The country has a $4-billion (U.S.) international debt, run up through the crisis, and an abysmal credit rating.

The second step is to start to revive the key, now frozen, sectors of the economy. Commercial agricultural – primarily the production of wheat and tobacco – was once Zimbabwe’s main source of foreign exchange. The sector has nearly collapsed since Mr. Mugabe’s highly politicized land distribution program began nearly a decade ago; farms were expropriated from skilled farmers, usually whites, and given to supposed veterans of the country’s war of independence (but often, in fact, to cabinet ministers), none of whom knew much about farming. At the same time, the government maintained Draconian price-and-import controls that destroyed small-scale farming and left millions of people without food.

Renson Gasela, who for 20 years headed the country’s grain marketing board and later served as the MDC’s agriculture critic, shares the buoyant mood, even though, he said, the damage to the agriculture sector has been massive. “I’m feeling very, very optimistic indeed,” he said.

If the international community steps in to help the new government buy seeds and fertilizer, he said, small-scale farmers could plant before the rains begin in six weeks, and potentially be self-sufficient this season, if the weather is good. Fast action will be needed to get ready for the planting of a season’s worth of commercial crops, he said, but that may be possible.

“The rehabilitation required is massive,” he said, and the economy must stabilize before anyone can start rebuilding. He described, as an example, how in September, he paid $50,000 Zimbabwe dollars for a small transformer to operate a bore hole, found it did not have the necessary capacity, and tried to return it a week later, only to discover that the same model now cost $1-million.

Many commercial farmers fled Zimbabwe. Some remain but have no capital, he said, and most of their equipment has been vandalized or destroyed. And none will take out loans to rebuild until they know their land title is secure.

“There will have to be a land audit to establish who is where, whether people have multiple farms, what land is not being used – it is a daunting task.” And politically incendiary. The mining sector, one of the few that has kept operating, though at less than half capacity, is also poised for growth, if regulatory issues are sorted out, said Jack Murehwa, the chief operating officer of Zimbabwe Platinum Mines, the country’s largest platinum mine, and former head of the Chamber of Mines. “The slowing down of production in the mining industry is due mainly to matters related to monetary policies and the legal framework.

“Once these two aspects are addressed, relatively significant changes should take place, especially with respect to the production of gold,” he said.

Gold production has slumped from 11 tonnes last year to an expected four tonnes this year.

“It is largely a matter of getting people back to work, and we believe that once we start working again, some of the skills that left the country will come back.”

None of this is going to happen fast. The United Nations’ Development Programme published a report last month called Comprehensive Economic Recovery in Zimbabwe, written by five Zimbabwean economists. It concludes that Zimbabwe needs growth of at least 5-per-cent a year over 12 years for per capita income levels to reach their 1991 level. And it says that a minimum of $5.2-billion (U.S.) in foreign aid, including debt relief, will be needed over the next five years if the government is to plug financing gaps, revive infrastructure and keep people fed.

But Mr. Munyeza, the tourism mogul, predicted that with a little stability, international investors, not just donors, will be hurrying back to Zimbabwe.

“A six-month window will dispel the fears of investors,” he predicted. “Not that everything will be hunky-dory, but you will find a very clear picture of where things are going.”

Shakeman Mugari is a freelance journalist based in Zimbabwe