Inflation is soaring above 700% in Zimbabwe, the Zimbabwean dollar is in free fall, the stock market is suspended. Private companies are in the government firing line, with a threat to evict Old Mutual from the stock exchange and EcoCash at the centre of money laundering allegations. Zimbabwean economist Prof Tony Hawkins and Africa Risk Consulting’s Tara O’Connor pick up on whether President Emmerson Mnangagwa’s position is secure. – Linda van TilburgÂ
Former President Robert Mugabe held on to power for 37 years, then managed with land grabs, corruption and an authoritarian grip to doom a country – once regarded as the breadbasket of the region – to a failed state, with an inflation rate running into eye-watering figures in 2008. In November 2017, Mugabe’s rule finally came to an end when the military stepped in, in what was regarded as a soft coup. When Emmerson Mnangagwa, known as the Crocodile, was installed as the new president, Zimbabweans celebrated in their tens of thousands.
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But despite promises of political reform and claims by the new president that the country was open for business, two and a half years later the party is over. Very little came of the reforms Mnangagwa promised. Inflation is against skyrocketing to more than 700 per cent, and trading on the stock exchange was halted at the end of June. Bloomberg reports that there is such public disquiet in Zimbabwe that many ruling party leaders, including those with military links, are losing patience with the president. Coup rumours are so rampant that the country’s security ministers called a press conference to deny them. The founder of Africa Risk Consulting, Tara O’Connor, told The Biznews Midweek Catchup webinar that in the present atmosphere, there is definitely the risk of another soft coup.
What we do know about Zimbabwe’s ruling class at the moment is that it’s deeply divided. Everything about this closing of the stock market shows that. I think it shows also a desperation, probably a lack of funds and an inability to meet the domestic demands on the government. But I also think it probably represents an area of disgruntlement and concern within the ruling elite. And when you’ve got that turbulence within, in an environment like Zimbabwe, it is vulnerable to those sorts of interventions, that may be a soft coup or some such. It is I would suggest at a risk of that.
The Transformation Zimbabwe Initiative is planning a march at the end of July to protest against Mnangagwa. The opposition is pinning its hopes on the demonstration, to mark the end of what they describe as Mnangagwa’s short but brutal dictatorship. Zimbabwean economist Professor Tony Hawkins however, says that he doubts that the government would allow the demonstration to continue.
I’ll be surprised if the demonstration goes ahead, particularly in the light of the statement that President Mnangagwa is going to make a statement on tightening up the Covid-19 lockdown rules. I’m sure that it will be very difficult for anyone to organise a demonstration. I don’t see it going ahead.
So like many other countries, the Covid-19 regulations are going to be used to stifle opinion?
O’Connor: My points were more about a sort of internal military intervention, your soft coup thing rather than the Covid emergency regulations that are a cover for all sorts of suppression as we’ve seen right across the continent from Egypt to Algeria everywhere.
With Zimbabwe again finding itself with hyperinflation, what does it mean for the future of the country? The International Monetary Fund said in February that Zimbabwe’s economic reform is off-track and without further donor support, the risks of a deep humanitarian crisis are high. But O’Connor hopes that the Covid-19 pandemic will lead to more debt relief for Zimbabwe.
There’s actually no doubt, given where it’s situated geographically, its natural resources, its human capital, all of those things make it a super would-be investment destination. But politics is in the way.
Nothing can be done without debt relief and debt relief will not come unless Zimbabwe is able to persuade the US Congress and therefore the IMF that it has taken sufficient democratic humanitarian steps to transform, leading to debt relief.
One hopes in a way, that Covid will also push that along, but until that happens and unfortunately I didn’t see any signs within Zanu-PF of actually coming to those reasonable conclusions. Unfortunately, I think it’s going to be more downsides before upsides in the long term.
Professor Hawkins said emigration is no longer an option for Zimbabweans.
There has to be some kind of international bailout rescue package or whatever you call it. That looks to be a long way away at the moment because of the reasons that Tara referred to in terms of local politics. The concern that I have about the longer term has to do with the kind of damage that has been done over the last 20 years. There are not many countries in the world that have gone through two hyperinflations in 15 years or whatever. We go back to a question asked by one of the questioners who said, why does the electorate keep on voting for this government? That really is a problem question I can’t answer, I wouldn’t even try to answer it. Normally you would expect the people to be influenced by their economic plight.
What people have done here, is that they’ve left, they have emigrated. Now, under Covid-19 you don’t do that, you’re not going to be able to do that any longer.
That’s the end of that growth model for the time being anyway, not just for Zimbabwe, but for a whole lot of African countries and other countries around the third world that rely on remittances.
It’s not going to be the same in the future until we have some resolution of this problem. So, I’m not as optimistic about the long-term. I don’t believe that natural resources, particularly in agriculture, under climate change, are going to be a great boon. I do think that we need to move up-market into more technology-intensive types of development.
Until we get that kind of model going, I think it’s going to be a very hard slog. So as long as people believe and I’m afraid they’re outsiders who believe it, that Zimbabwe will double its per capita income within 10 years or something, well, I’m afraid people are going to be disappointed.
