Barry Wood: Is 2017 meltdown year for Zimbabwe, as it blunders towards disaster?

From afar, it’s hard to imagine Zimbabwe getting much worse before it gets better. But speak to Zimbabweans and they will tell you that the picture is grim on the ground. Many residents can only imagine the country deteriorating further. What does this picture of a worse-off Zimbabwe look like, then? Journalist Barry Wood assesses the situation. It is not inconceivable that civil war or a military coup looms, as has been hinted at by politicians in opposition to President Robert Mugabe. Rule of law has already deteriorated to the extent that police officers routinely stop motorists and extract “bribe” money on the flimsiest of excuses. Money is hard to come by – even if it is saved in bank accounts, as cash dries up behind the scenes and citizens queue for small withdrawals. Long-term friend China is worried about the way things are panning out in Zimbabwe, too. Is 2017 the year that the political decline will finally reach a turning point? Unfortunately the end game could be drawn out for much longer; that’s certainly what many Zimbabweans have become used to after waiting for years, and even decades, for elderly dictator Mugabe to step down or pass away. – Jackie Cameron.

By Barry D. Wood*

At the 2009 International Monetary Fund meeting in Istanbul, Zimbabwe’s Tendai Biti accepted an award as Africa’s finance minister of the year. Courageously, said Euromoney magazine, the 43-year-old lawyer turned economist had accomplished great things in just seven months on the job. He had turned off the printing press, ending one of the world’s worst hyperinflations. Biti abolished the Zimbabwe dollar that was so discredited that billion dollar notes were needed to buy basic goods. Biti said the US dollar should be Zimbabwe’s money. It remains so today.

                                                       Barry D. Wood

In accepting the award from Euromoney, Biti said it was a miracle that a national unity government had come to power. Rule of law, he promised, would return to in a land devastated by mismanagement and corruption. Biti blamed Robert Mugabe, Zimbabwe’s president since 1980, for the economic collapse. Then he added an ominous footnote. Mugabe, he said, was holding on to the central bank in violation of the power sharing agreement.

Biti lasted four years until a disputed election led to Mugabe’s Zanu PF party regaining full control of the government in 2013. Biti’s accomplishments of recovery and fiscal discipline were undone.

Zimbabwe today confronts economic calamity brought on by corruption, the worst drought in 30 years, political infighting, weak commodity prices, and a 50% appreciation of the dollar against the currency of South Africa, Zimbabwe’s major trading partner.

Gradually Zimbabwe’s formal economy ground to a halt as businesses closed and unemployment climbed to 90%. A fifth of the population emigrated, Without a national currency and unable to borrow abroad because creditors hadn’t been paid, Zimbabwe ran out of money. Civil servants, police and the army are seldom paid on time.

Zimbabwe bond notes. Image courtesy of Twitter.

In just four years Zimbabwe lurched from debilitating hyperinflation to the exact opposite: deflation.

As an emergency fix Mugabe’s central bank chief on November 30^th began circulating a parallel currency euphemistically called “bond notes” because citizens adamantly oppose reintroduction of the Zimbabwe dollar. Gresham’s Law–bad money driving out good—will likely take effect as people spend the bond notes while hoarding dollars. A depreciating value of bond notes could cause havoc as they are fixed one to one with the dollar.

Currently heading an opposition party, Biti warned on December 9^th that Zimbabwe faces financial Armageddon that could lead to civil war or a military coup. He said only a unity government and a switch from the US dollar to the South African rand can avert disaster.

Looming above the economic malaise is political paralysis. Mugabe, 92, has not revealed a plan of succession. Former top deputies in the ruling party are feuding and one has established her own political party in advance of elections scheduled for 2018. The president’s wife is in the mix, presenting herself as her husband’s logical successor. 

Chinese expert on Zimbabwe, Wang Xinsong of Beijing’s Normal University, says China worries about the “complicated and uncertain” political situation in Zimbabwe. China is a big aid donor and major investor in Zimbabwean agriculture and mining. President Xi Jinping visited Harare in December 2015 assuring Mugabe that China is Zimbabwe’s “all weather friend.”

But that may be changing. Wang says China—like western nations– is unsettled by Zimbabwe’s indigenization law that says enterprises must be locally owned. Wang says Beijing is dismayed with political turmoil and is “walking a fine line, not taking sides with political factions and keeping China-sponsored assets safe.”

The succession drama is also a challenge for the west. European powers have taken the lead promoting a plan to clear Zimbabwe’s huge arrears to international lenders so that fresh credits can be available for implementing reforms. Critics oppose the plan as a lifeline for Mugabe and his cronies, assuring a continuation of brutal dictatorship.

In the meantime what’s left of the economy steadily deteriorates. One specialist just returned from Zimbabwe is deeply pessimistic. Insisting on anonymity he agrees with Biti that the situation is dire. He fears a collapse of government authority and degeneration into a Somalia-style failed state of roving bands and lawlessness. 

• Barry D. Wood writes about economic issues from Washington. He last visited Zimbabwe in 2014. He began journalism at the Financial Mail in Johannesburg.

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