Display of wealth hides extreme poverty

I can see it all from my office. The fights. The weeping. The celebrations. The flashy cars. Even the cops. I can see it all because my office window faces the top end of the “World Bank”- the hub of illegal foreign currency dealers in Bulawayo.

I see the fights when someone tries to con the illegal foreign currency dealers. The weeping when someone intending to buy foreign currency is conned by the dealers. The celebrations when one of the dealers comes by to show off a new car to her colleagues. The flashy cars, some with foreign number plates, that stop by for the occupants to change money. The cops who routinely round-up the illegal foreign currency dealers but at times also come to change money.

Business is booming. One can hardly imagine there was ever Operation Murambatsvina. The display of wealth that I see everyday from my office window makes me wonder how many people are still earning an honest living. Where does all the money that is changing hands come from?

The abundant wealth seems to be everywhere. People in the high-density suburbs are extending their houses, drive imported Japanese vehicles and watch DSTV.

Those in the low-density suburbs are building mansions. They drive the latest four-by-fours. Their children drive to school in posh cars. They go to schools where, each term, they pay fees that are more than the average worker’s annual salary.

One eighteen-year-old even boasted that he had so much money to play around with that his perfume alone cost $5 million a bottle.

The wealth displayed on the country’s roads and suburbs gives one the impression that Zimbabweans are filthy rich. One can be excused for thinking so. Why not, when one reads stories that seem to support this.

In Harare a domestic worker went on a spending spree that ended in Bulawayo after stealing more than $420 million that was kept in the house by his employer.

Another man was reported by the police to have been robbed of $6 billion that was stashed in the boot of his car but he denied the report claiming he lost less than $500 million.

Two villagers in Mberengwa were robbed of $8.4 billion which they were carrying in a donkey-drawn cart.

Zimbabwe is behaving like a typical shadow or underground economy. One study even said 63 percent of the country’s economy was not in central bank governor Gideon Gono’s books.

Friedrich Schneider, an economics professor at the University of Linz in Austria, who has done extensive studies on the shadow economy, says the shadow economy is also known as the underground, informal, or parallel economy. It includes not only illegal activities but also unreported income from the production of legal goods and services, either from monetary or barter transactions.

Most of the transactions in a shadow economy are in cash so as to leave no observable traces for tax authorities. A bigger shadow economy therefore means a greater demand for banknotes.

While Zimbabwe, at one time, had a booming informal sector that was threatening to overtake the formal one, Bulawayo business consultant Eric Bloch says the apparent display of wealth is just an illusion. It gives a distorted picture that Zimbabweans have money.

“The majority of the people in Zimbabwe don’t have money. Seventy to 80 percent of the people don’t have money. Perhaps 20 to 25 percent can make ends meet. But it is only the top two percent that have real money and they flash it around. That is why they are quite visible and easily become targets,” Bloch said.

“This is only a small fraction of the population, mostly people who are dealing in illegal foreign currency, people selling fuel on the black market, and those engaged in crime. They make a quick buck and also spend the money recklessly. The majority of the people are poor.”

Labour economist Godfrey Kanyenze concurred.

“This is all arbitrage. People are making money out of nothing, cashing in on speculation, just like the banks were doing in 2003,” Kanyenze said.

Arbitrage is the buying and selling of products, financial securities or foreign currency between two or more markets in order to take profitable advantage of any differences in prices quoted at these markets.

This is what has been happening in Zimbabwe. Those with cash have been cleaning the supermarket shelves of products in short supply and then reselling them at exorbitant prices.

The government admits in its Millennium Development Goals (MDG) report that 80 percent of the population was classified as poor way back in 2002. The number of poor might actually have increased by now because the economy has further deteriorated.

Under the MDG the government intended to reduce extreme poverty and hunger by at least half by the year 2015.

But it is already way off target. It gave five scenarios on how this could be achieved. The first was that the country would have to record annual growth of 6.6 percent for the next 13 years to 2015. But it wrote this off as unrealistic because it could never achieve that growth rate as the country had recorded negative growth since 2000.

The second scenario entailed growth of four to five percent a year. This would achieve a poverty reduction of 27 percent by 2015. While it said this was more realistic, the country is still realising negative growth.

The MDG said a more realistic goal to halve poverty levels was to aim for 5 percent growth up to 2020. Once again the government has already missed this target.

The fourth scenario was to aim for a four percent growth over 24 years. This would reduce poverty by half by 2026. The government said while this was a realistic goal in terms of growth, it was unacceptable because of the long period required.

It wrote off the fifth scenario which would see poverty reduced by half by 2038. This would require the economy to grow by 3 percent annually.

Having already gone the first three years in negative territory, Zimbabwe will need a radical policy shift to reduce poverty.

Right now, things are getting worse. Inflation is still on the increase. The Consumer Council of Zimbabwe’s basket is now pegged at $21.8 million a month. The labour movement says the average wage is only $5 million.

The situation is so bad that a majority of the 20 percent of the population that is employed is now classified as poor. The Consumer Council even advises those employed to supplement their incomes through legal activities otherwise they would starve.

Reducing poverty therefore remains a pipe-dream for the time being. One young man, doing his window shopping in Bulawayo at the weekend, summed it all in a song by award winner Hosiah Chipanga.

Mai mwana ngativakire imba yedu pamusoro pegomo, he sang. Kana vokwidza mitengo, inobata vari pasi. ( My wife let’s build our house at the top of the mountain. When they increase prices, only those at the bottom will be affected”.

This is exactly what is happening in Zimbabwe. While the majority are struggling to make ends meet -having to work for four months to afford one month’s basic requirements- life couldn’t be better for a few. And they wouldn’t dream of any change.

Posted-9 February 2006

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