Thursday, July 12, 2007

Desperate times in Zim


An idea floated at the weekend that an economic lifeline could be thrown from neighbouring South Africa, if the almost worthless Zimbabwe dollar were pegged to the South African rand, is nothing but fantasy. ... Nor would South Africa wish to subsidise Mr Mugabe’s misrule. Nor, indeed, would it be a simple matter to achieve rapid currency union between South Africa (with single digit inflation) and Zimbabwe (six digit inflation, where notes are worth less than toilet paper).

Yet Mr Mugabe is not sitting comfortably.....His people are growing frustrated over the high price of petrol and food, along with their despair at political repression. In the past Mr Mugabe managed to buy off political allies and sustained some popularity (at least in rural areas) by snatching commercial farm land and dishing it out to his supporters. But that trick cannot be repeated. There is some expectation that foreign businesses may be targeted next, but the most valuable ones remaining—mines—will be difficult for Mr Mugabe to grab without upsetting South Africa. That leaves few options.

Instead the president, who famously despises “bookish economics”, has decided to outlaw inflation. Price freezes have only been enforced through the arrest of scores of businessmen who are accused of profiteering. The result: shops are bare of basic goods, as businesses refuse to sell more than a minimum of flour, sugar, maize and other items at a crippling loss. There has been panic buying all over the country. In Harare, the capital, crowds wait outside supermarkets ready to rush in and grab whatever they can. Where basics such as cooking oil are available they are rationed by shopkeepers. Fuel is in short supply, with long queues of cars reappearing outside Harare’s petrol stations. As factories prepare to close operations their owners, in turn, are being arrested and forced to keep operating...."

Ah, but unless he becomes more efficient, the black market will be strong, and people will manage to live thanks to extended family, gifts from abroad, and of course bartering.

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