Thursday, July 12, 2007

Email from Zimbabwe

I was doing some web searches on Zimbabwe when I came across the following email reprinted on Letters from Africa. I am repeating it in its entirety because it provides one insight into that strange, Kafka like, world that Zimbabwe has become.

Drifting onto the Rocks and Burning the Boat

Yesterday the regime published in the state press the list of those productsthat are to be controlled at a fixed price. It covers all the basics from milk to cement. The prices shown are between 20 per cent and 50 per cent ofthe actual cost of producing and marketing those products. All other products produced by manufacturers are now price controlled in that the producer must fix their current prices at the level they were 3 week ago(18th June) and must from now on get the written approval of the Ministerfor any new prices.

June the 18th marks the start of this campaign. On that date they entered the parallel market for foreign exchange using billions of dollars in local currency just printed, driving the price of foreign exchange from about 100000 to 1 for the US dollar and 7500 for the Rand (the two most frequently traded currencies) to 300 000 to 1 or more; some trades were done as high as 400 000 to 1 for the US dollar and similar sorts of rates for the Rand.

As a consequence, since all imported items are priced at the replacement cost in foreign exchange at the parallel market rate, prices rose across the board. This pushed inflation well over the 15 000 per cent per annum level and created all sorts of pressures in the local economy.

When the exercise stopped after 10 days or so (I assume they ran out of cash), the foreign currency rates fell back to about 200 000 to 1 for the US dollar and 15 000 to 1 for the Rand. Many prices were adjusted downwards (fuel from 180 000 for a litre to 120 000) and business went back to"normal". They then unleashed the next phase.

This second phase is now well under way and is expressed in the wholesale arrest of business managers and Directors (nearly 2000 as of last night), the physical control of prices by thousands of Police and Militia - operating for the first 10 days without any legal backing at all and now the promulgation of new regulations that are just plainly unworkable.

Just take what they did yesterday to the beef industry. They had fixed the retail price of beef (for all cuts) at an arbitrary 90 000 or 120 000 dollars a kilogram (why the difference no one can tell me). In Beitbridge we were forced to sell our stocks at 90 000, in Masvingo, just up the road, they were forced to sell at 120 000. It did not matter really, just changed the degree of your losses. When the final rush of customers was over we had run out of stocks, lost many millions of dollars and could not find any farmers who would sell us cattle at a price that would allow us to operateat the new prices.

So what do they do? Yesterday they cancelled the licenses of ALL private abattoirs across the country, hundreds of them. In their place, they"instructed" farmers to approach their nearest Cold Storage Commission abattoir to make arrangements for them to buy their cattle, slaughter them and deliver meat at the "controlled" price to butchers.

Now I was the Chief Executive of the CSC when it was the largest meat processor in Africa. It has a superb network of 5 internationally registered Abattoirs capable of slaughtering up to 650 000 head of cattle a year. We actually handled over 700 000 head in one year during a drought.

We no longer have that sort of industry, but still kill between 350 000 and 400 000 head a year. The CSC however is hardly a player. Two of the abattoirs have not killed an animal for 15 years, the others are on a care and maintenance basis with a tiny throughput. You seldom see a CSC truck onthe roads and they are almost moribund.

Now, at the stroke of a pen, the Minister thinks he can order the closure of hundreds of small abattoirs that have taken the place of the CSC, open up the CSC works and supply the country overnight with its needs. If ever you needed to understand the extent of the stupidity of these so-called Ministers, this is it, and Mad Made is not even the Minister of Agriculture any more!

When I was at the CSC we handled up to 140 000 tonnes of beef a year, exported to many countries including the EU and employed 5000 peoplewith dozens of excellent engineers, accountants and managers - most with more than 20 years experience. That is all long gone, they do not have the physical, financial or management capability to undertake this exercise thrust on them at a days notice.

Yesterday we closed down our clothing factory in Bulawayo and told the staff to go home and come back next week when we might know what to do. The reason, all our orders from local retailers have been frozen - they simply cannot function under the new regulations. If there is no movement in a week or so, they will halt all buying and run down their stocks and then, like us, close down. We are affected immediately as we hold no stocks of finishedgoods - we manufacture to order.

When existing stocks of controlled items run out there will be nothing left.

That includes all the basic essentials - salt, maize meal, flour, matches and meat. When I wrote over the weekend about refugees flooding into SouthAfrica I do not think I overstated the probabilities. I now have no doubt at all and all of us may be the new victims. What kind of reception will we get?

I heard talk in Beitbridge yesterday that the South African Army has just shot 100 head of cattle straying into South Africa across the River. I also heard disturbing reports that they had shot 7 "border jumpers". It may or may not be true, but it does describe in graphic terms the sort of reception poor, homeless, impoverished and desperate Zimbabweans get when they try to escape to anywhere where sanity prevails.

As for the crazy guys at the helm here, they know their Zanu PF ship is headed for the rocks of destruction in the SADC talks and their aftermath, they have opted to burn the boat rather than face the music. The problem is, we are all in this particular boat - not out of choice but simply historical reality. If they are allowed to burn the ship around us like this, we haveno option but to take our chances in the water and swim to shore.

Do not think these Zanu PF guys are irrational or dumb. This is carefully planned and is being ruthlessly implemented. Just the same as Murambatsvina and at the same time we must recognise that they think they have a chance of success, even if it is small and their commitment to the SADC process is nil. Theirs is a plan to fight to survive and if they fail to leave nothing behind.

Eddie Cross, Bulawayo, July 12th 2007


Lexcen said...

This pretty much describes the old Soviet Union centrally controlled economy.

Jim Belshaw said...

Lexcen my apologies for the slow response to this comment. I kind of got swamped!

You are right, of course. But it seems to go further than this in ways that I find hard to understand.