Mugabe's decree on prices puts Zimbabwe economy in a tailspin

Mugabe's decree on prices puts Zimbabwe economy in a tailspin
By Michael Wines
Wednesday, August 1, 2007

Source: International Herald Tribune

BULAWAYO, Zimbabwe: Robert Mugabe has ruled over this benighted country, his every wish endorsed by Parliament and implemented by the police and military, for more than 27 years. It appears, however, that not even an unchallenged autocrat can repeal the laws of supply and demand.

One month after Mugabe decreed just that, commanding merchants nationwide to counter 10,000-percent-a-year hyperinflation by slashing prices by half and more, Zimbabwe's economy is at a halt.

Essentials like bread, sugar and cornmeal, staples of every Zimbabwean's diet, have vanished, seized by mobs of bargain-hunters who denuded stores like locusts in wheat fields. Meat is nonexistent. Gasoline is nearly unobtainable. Hospital patients are dying for lack of basic medical supplies. Power blackouts and water cutoffs are endemic.

Manufacturing has slowed to a crawl, because few businesses can produce goods for less than their government-imposed sale prices. Raw materials are drying up because suppliers are being forced to sell to factories at a loss. Businesses are laying off workers or reducing their hours.
Zimbabwe's economy has been shrinking since 2000, buffeted by political turmoil, capital flight and mismanagement. Never has it been in a more dire state than now, business executives say.
"The last seven years, I haven't panicked at all. I always figured that where there's a will, there's a way, and I'd make some sort of plan," said one Bulawayo clothing manufacturer who, like most people, refused to be identified for fear of retaliation by the government. "Now I'm not so sure. I think there's a real collapse coming."

Zimbabwe's vast underclass, the majority of its 10 or 11 million people, is perhaps less affected by this latest economic shock, simply because it has long been unable to afford most food anyway. The rural poor survive on whatever they can grow. Urban and rural poor alike stay afloat with food and money sent by the two million or more Zimbabweans who have fled abroad. Remittances are so vital that in some rural areas, the South African rand has replaced Zimbabwe's worthless dollar as the currency of choice.

Rather, it is the middle class, which had muddled through the last seven years of decline, that is likely to feel the brunt. Factory layoffs and slowdowns are bringing new poverty to the 15 percent or 20 percent of adult Zimbabweans who still have jobs. Pensioners, whose fixed incomes already have been gutted by hyperinflation, now find that no amount of money can purchase some staples.

Private doctors said in interviews that diseases of poverty, including tuberculosis and malnutrition, are starting to appear among their patients, including the minority whites who once comprised the wealthy class.

"Considerations of color have begun to blur very much," said one Bulawayo doctor whose average patient is a white business manager. "White people will tell you, a little embarrassed and shy, that they're eating nothing but sadza," or corn meal porridge, the doctor said. "They've been reduced to the diet of the rural poor."

Bulawayo, whose 700,000 or more people make it Zimbabwe's second-largest city, painfully reflects the impact both of Zimbabwe's long economic descent and of the latest price-slashing. Most of the goods available on store shelves this week were those that people did not need or could not afford - dog biscuits; ketchup; toilet paper, which has become a luxury here; gin; onions; cookies.

At city-center and suburban locations of TM, a major supermarket chain, aisles of meat coolers were empty save a few plastic bags of dog meat. Flour, sugar, cooking oil, corn meal and other basics were not to be found. A long line hugged the rear of one store, waiting for a delivery of the few loaves of bread that a baker provided to stay in compliance with the price directive.
Amid the chaos, the government remains resolute. Mugabe has cast the price cuts as a strike not against hyperinflation, but against profiteering businesses who, he says, are part of a Western conspiracy to re-impose colonial rule. In that view, hyperinflation is part of their strategy; price rollbacks are the government's countermeasure.

Mugabe's June 26 decree, much of which was later enacted into law, was draconian: businesses were ordered to reduce their prices to the levels existing on June 18, generally by about 50 percent. Shop owners who refused to comply would be jailed. Stores that closed or refused to restock goods would be taken over by the government.

"We are at war. We will not allow shelves to be empty," one of Mugabe's vice presidents, Joseph Msika, said in a July 18 speech.

Since then, gangs of price inspectors have patrolled shops and factories, imposing sometimes-arbitrary price reductions, and as many as 4,000 businesspeople have been arrested, fined or jailed. State-run newspapers publish lists of telephone numbers on their front pages daily, exhorting citizens to report merchants whose prices exceed dictates.
Ordinary citizens initially greeted the price cuts with a euphoric - and short-lived - shopping spree. However, merchants and the government's many critics say that much of the cut-rate merchandise has not been snapped up by ordinary citizens, but by the police, soldiers and members of Mugabe's ruling party who have been tipped off to the price inspectors' rounds.
In Plumtree, a hamlet near the border with Botswana, a line of shoppers gathered outside a shoe store last week even before opening hours, the area's member of Parliament, Moses Mzila-Ndlovu, said this week. As the store opened, government inspectors appeared - and the throng followed them in, buying up stock as it was marked down.

"It's theft, outright theft," Mzila said. "Some of them had big cars, shiny, sparkling double-cabs, and they filled them up with shoes and just drove away."
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