As it is, Chiwenga – who reportedly is now receiving medical treatment in India – probably can’t move against Mnangagwa while Cyril Ramaphosa remains President of neighbouring South Africa. Ramaphosa, who recently called for sanctions to be lifted on Zimbabwe, has made it very clear behind the scenes that he will not tolerate a coup – and the meagre liquidity which does seep into Zimbabwe comes in large part from South Africa. Squeezing Chiwenga dry by economic means is well within Ramaphosa’s capacity.
But while both Mnangagwa and Chiwenga are unwilling or unable to move against each other, Zimbabwe is left with a divided government, a stalemate that means even less agreed action on the economy.
Second, the President is genuinely unable to gauge the mood of the people, or to understand how deeply they are affected by economic malfunction while they watch the financial malpractice of so many in the ruling elite. It is as if the material comforts of protected suburbs such as Harare’s Borrowdale Brook insulate the ruling oligarchic elite from any sense of what deprivation means.
Third, the much-touted “technocratic” Finance Minister, Mthuli Ncube, is out of his depth. Faced with an informal money market where government bond notes were rapidly losing value against the US dollar, and where there was a huge shortage of US dollars, small business operators in Zimbabwe turned to electronic cell phone transactions – establishing a kind of rough and ready but robust virtual economy.
But Ncube’s decision to tax these cell phone transactions immediately knocked the confidence out of that form of exchange. The textbook says you must broaden the tax base and the new tax did just that. But it was also naïve in the extreme, as it broke the back of any vibrancy left in the Zimbabwean street-level urban economy.
Ncube’s naivety was again seen in the fuel price hike. There is no fuel because the country has insufficient foreign exchange to import the petrol needed. Again, the textbook says that when supply fails to equal demand you must do one of two things: either increase supply, which is impossible in Zimbabwe, or dampen demand. The price rise sought to achieve the latter, but it brought the possibility of economic life for a huge number of ordinary people to a standstill.
The price of transport into town to work, to look for work or to sell or buy whatever is available in the street markets became prohibitive. One price rise has therefore caused a multiplicity of damaging consequences.
Ncube now proposes a return to a national currency within a year, rather than future reliance on the US dollar. This will almost certainly mean another wave of hyperinflation, the very reason why the previous national currency was abandoned and the US dollar adopted.
Continued next page
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