April 11, 2017

Zimbabwe shows that dysfunction can be a long-term game

 

Dianna Games - Business Day

Zimbabweans make it look easy to live in a dysfunctional state. Harare’s supermarkets are full, the streets are busy and informal traders have proliferated along the sidewalks in recent years as formal employment has shrunk. The roads, empty during the dark days of hyperinflation, are bustling with cars.

It is easy to get caught up from afar in the bad news; to assume Zimbabwe is about to implode at any time. But people have got used to hardship and are even making good money out of politically driven dysfunction.

One of the key drivers of the economy is, as a Harare businessman said recently, an "unquantifiable and unmeasurable resilience". This resilience has played into the hands of the governing party, Zanu-PF, and President Robert Mugabe. It has kept the economy going through tough times, bolstered, ironically, by remittances sent home by Zimbabweans who gave up on change at home.

Long-term investors in Zimbabwe have not given up on change. Most have remained despite the hardships because of the hope of change, which has seemed imminent for years. They recognise the potential of the country, shown in better times, and want to reap the rewards of political change.It has been a long wait. Zanu-PF and Mugabe are as entrenched as before. Poor governance, repression, political opposition and economic crisis have failed to move them. Many have given up on the prospect of radical change, accepting Zanu-PF will be around for a long time, with and without Mugabe.

Investors have been sniffing around, looking for cheap assets but also eyeing the lucrative mining sector. However, the onerous empowerment legislation, which makes it mandatory that black Zimbabweans own 51% of all enterprises invested in Zimbabwe, is still a deterrent despite assurances by some ministers that it is now "flexible".

For now, many people are just getting on with their lives. It is not easy. There are pockets of wealth in the cities but poverty rates are high.

The official unemployment rate is 94.5%. Many business people who enjoyed jobs in better days are now running informal businesses. But these are being affected by serious cash shortages as the banks strictly limit withdrawals

 
The bankrupt government has turned to treasury bills to prop up the state, issuing bills worth $2bn over the past two years. The proceeds have helped the government to pay public servants, who swallow up 80% of the budget. The government lacks capacity to service this growing domestic debt, forcing banks to roll over the bills on maturity, posing a risk to heavily exposed financial institutions.

Zimbabwe’s options for new money are limited due to external debts. Its nostro accounts are depleted, making it difficult to pay for imports.

Politically, it is business as usual. Mugabe is Zanu-PF’s presidential candidate in the 2018 election. Rival governing party factions continue to squabble over the unresolved succession issue.

The lesson from Zimbabwe, and many other countries, is that the impoverishment of a country is not an event, it is a moving line of tinkering with institutions, emboldening the president to close down democratic space, allowing the head of state to change the constitution and to rig elections. He is still cheered on by a large part of the population and supported by party sycophants.

The hollowing out of a state is not an event; it is a process that, as Zimbabwe has shown, can last a very long time.

• Games is CEO of business advisory Africa @ Work. See original article on https://www.businesslive.co.za/bd/opinion/columnists/2017-04-10-dianna-gamesits-business-as-usual-as-mugabe-erodes-democracy/

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