Zimbabwe's President goes crazy, economy is officially screw

[Lunchbox]

http://www.guardian.co.uk/zimbabwe/arti ... 97,00.html

Zimbabweans are shopping like there's no tomorrow. With police patrolling the aisles of Harare's electrical shops to enforce massive government-ordered price cuts, the widescreen TVs were the first things to go, for as little as £20. Across the country, shoes, clothes, toiletries and different kinds of food were all swept from the shelves as a nation with the world's fastest shrinking economy gorged itself on one last spending spree.

Car dealers said officials were trying to force them to sell vehicles at the official exchange rate, effectively meaning that a car costing £15,000 could be had for £30 by changing money on the blackmarket. The owners of several dealerships have been arrested.

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President Robert Mugabe's order that all shop prices be cut by at least half, and sometimes several times more, has forced stores to open to hordes of customers waving thick blocks of near worthless money given new value by the price cuts. The police and groups of ruling party supporters could be seen leading the charge for a bargain.

Mr Mugabe has accused business interests of fuelling inflation, running at about 20,000%, to bring down his government. A hotline is in place to report "overcharging", and retailers who flinch at slashing prices are being dragged before the courts. Several thousand have been arrested for "profiteering" over the past week, including the chief executives of the biggest retailers in the country, some of them foreign-owned.

Economists say the price cuts will only deepen the national crisis, leaving many shops bare because they will not be able to afford to restock while official retail prices remain lower than the cost of buying wholesale or importing. Mr Mugabe has dismissed such warnings as "bookish economics".

Some businesses fear that Operation Reduce Prices is intended to pin the blame on the private sector for Zimbabwe's economic problems as a step towards seizing control of many companies in the way that white-owned farms were expropriated at the beginning of the decade, sparking the crisis.

Parliament is expected to pass legislation in the coming weeks that will effectively give a controlling stake in all publicly traded companies to ruling party loyalists and others chosen by the government.

The impact of the price cuts was felt almost immediately as fuel virtually disappeared from sale after garages were forced to sell petrol for 23p a litre, less than they paid the state-owned supplier.

The police and army broke the locks on petrol pumps at some garages and tanks ran dry amid panic buying. Now petrol is available only on the blackmarket, at more than seven times the official price and three times what garages had been charging. By Saturday, most minibus taxis had gone from the roads because drivers could not find petrol. Crowds of workers were left on kerbs for hours trying to get to or from their jobs.

The riot police had to be called out to the South African-owned Makro super store in Harare after thousands of people stormed the shop after it was forced to slash prices. The scenes were replicated in stores throughout Harare. The Bata shoe chain's shops were stripped bare in two days by people snapping up pairs for as little as 20p.

Food is still available, although bread, sugar, cornmeal and other staples are hard to find, and meat has all but disappeared because livestock owners say it is now uneconomic to slaughter their animals. Much of the meat that is available is goat slaughtered in backyards and sold in informal markets.

The rest of the food supply - already severely undermined by drought and lack of production on land seized from white farmers - is also under threat after Mr Mugabe threatened to take over manufacturers if they shut down their plants on the grounds that they were uneconomic. "Factories must produce. If they don't, we will take you over ... We will seize the factories," he said.

Last week, the government said it was reviving the State Trading Corporation, shut down two decades ago because of mismanagement, to take over businesses that collapse or are seized. But many factories are unable to produce goods because electricity and water are unavailable for much of the day.

The price cuts were ordered by the joint operation command, a committee of army, intelligence and police officers closely tied to the ruling Zanu-PF and chaired by Mr Mugabe.

The government despatched security personnel and party cadres, including its notorious "green bomber" thugs, to enforce the price cuts, in some cases by beating up shop managers who did not implement them quickly enough.

"Zanu-PF is at heart a military organisation and that's exactly how it's gone about this, as a military operation," said David Coltart, an opposition MP. "The benefits will only last a few weeks at most and then we're going to have to live with the consequences. They believe they can dictate price cuts and print money with gay abandon but ultimately it will rebound. Not ultimately, very soon."

Business leaders say one reason for the price cuts is to quell unrest in the security forces, which saw a dramatic increase in inflation last month wipe out a 600% pay rise in May. They also fear the campaign is a step towards doing to private companies what was done to white farmers. Mr Mugabe is pressing a law through parliament in the coming weeks that will require all businesses to be at least 51% Zimbabwean owned and managed.

Zanu-PF has dressed up the move as an affirmative action measure to help previously disadvantaged black people. But firms will not be able to choose their new partners. They will be selected by the government. The measure will be paid for by taxing the same businesses forced to hand over control.

Mr Coltart said the move was essentially a means for the ruling party and military to take over the economy. "We can't expect a rational policy to emerge. You will see the military in charge of manufacturing. We've already got the military in charge of railways and grain marketing and the electoral process. There are military men now involved in all sorts of other businesses. The militarisation of the state will continue," he said.

In a letter to the cabinet the governor of Zimbabwe's central bank, Gideon Gono - until recently considered one of Mr Mugabe's closest allies - said that price controls must be scrapped and foreign investments and property rights protected to put the country on the path to economic recovery.

He also said that the seizure of white-owned farms had been counterproductive because it cost Zimbabwe foreign currency earnings by losing tobacco exports and scaring off investors.

Many of Mr Mugabe's opponents agree with Mr Gono but they are quietly heartened by the latest upheaval. They are fond of quoting the US ambassador to Harare, Christopher Dell, who recently said that Zanu-PF was committing regime change on itself with its disastrous economic policies and that Mr Mugabe would be gone by the end of the year.

[butters]

Good God. Even the "communists" of the twentieth century weren't stupid enough to force businesses to sell below cost. This may boost spending in the very short run, but in the long run, Zimbabwe will have the biggest famine they've ever had as producers in other countries choose not to bring their goods to market in that country.

[mrandyk]

I dont see anyone sticking around that country very much longer unless they have to.

[melancholy]

That's insane! By the time the dust clears on this one, there will be no shops left. Bullying shop owners and food manufacturers to continue working when they are losing money at an accelerated pace and have nothing left to operate with is just ignorant.

[ace]

I dont see anyone sticking around that country very much longer unless they have to.

People aren't likely to just uproot their families, quit their jobs, and change their lives that easily. It may be difficult for them to live now, and in the future with this development, but completely leaving your home isn't easy either.

[Hawq]

I saw the first part of the title for this thread & thought 'Why is that news? we've all known that for years' further reading left me thinking 'good god he was over the line before but now its not even in sight'

[Sir Savant]

I am a bad person for reading halfway and wondering whether I could pay someone to get me a TV or something.

Is there anything we can do to not let them screw up completely?

[Ex-Cyber]

My enthusiasm for free markets has cooled quite a bit in light of the abuses that have gone on throughout history, but as far as I can tell this is just an excuse by Mugabe to oppress his population, not a legitimate attempt to rectify problems with the system. By all appearances he's nothing more than a well-dressed thug.

[Hawq]

My enthusiasm for free markets has cooled quite a bit in light of the abuses that have gone on throughout history, but as far as I can tell this is just an excuse by Mugabe to oppress his population

He's never needed excuses before, why start now? though this time he can say 'I let them have cheap stuff' I guess even though it was for evil purposes

[Calavera]

Were the car dealers actually selling cars that cheap?

[Hawq]

If they werent they may have been 'disappeared'