ZIMBABWE CRISIS REPORTS Issue 30 MAY 2008 Fresh insights into the Zimbabwean situation PRE-ELECTION SWEETENERS FOR VOTERS Already wielding the big stick, the government has eased economic restrictions in hope this will buy votes for Robert Mugabe. By Happiness Chikudo in Harare As Zimbabweans continued flocking to the banks to offload foreign currency in the wake of a major monetary reform, traders thronged border crossings last week to import scarce commodities after the government scrapped duties on some food imports. Analysts are agreed that President Credit: Lazele Robert Mugabe has introduced these New 500 million-dollar banknote issued on May 15. Picture taken May 20. economic measures with a view to securing victory for him in the forthcoming second round of the Economic liberalisation election officials ruled that neither presidential election. candidate had won the 50 per cent designed to win over majority needed for outright victory. In the first round, held on March 29, voters ahead of June 27 Mugabe lost to Morgan Tsvangirai, ballot. On May 15, the government’s Herald leader of the Movement for newspaper announced that the Democratic Change, MDC, but second round would be held not within NEWS IN BRIEF On May 15, the Herald newspaper result, Tsvangirai delayed his return Robert Mugabe acknowledged that announced that the second round of from an extended lobbying trip the March 29 polls had ended in a the presidential election would be abroad. “dismal result” for the regime. While held not within 21 days as prescribed accusing the MDC of doing well only by law, but instead within 90 days of Also on May 19, the MDC said the because it was backed by Zimbabwe’s the date the results were announced. death toll of supporters and activists enemies abroad, he noted that his The Zimbabwe Electoral Commission killed in recent violence had risen to team “went to the election said the next day that the vote would 43. The party accuses the ruling completely unprepared, unorganised, take place on June 27. ZANU-PF of an orchestrated campaign and this against an election-weary to win back ground lost in the March voter”. ZANU-PF was “bickering and The Movement for Democratic 29 ballot by intimidating and divided“, and its leaders from the top Change, MDC, on May 19 publicly displacing voters suspected of voting down “all share the blame”, he said, accused the Zimbabwean military of against the Mugabe regime. adding, “We have a crucial run-off plotting to use snipers to assassinate ahead of us. We must use it to repair opposition leader and presidential In a speech to ZANU-PF’s central the damage and shortcomings which candidate Morgan Tsvangirai. As a committee on May 16, President we suffered.” MAY 2008 1 THE INSTITUTE FOR WAR AND PEACE REPORTING the normal 21 days from the date the machinery and spare parts, electricity, The 90-day suspension was needed first-round result was announced, but fuel, chemicals and “other essentials” in order to ensure there was a instead within 90 days, with a deadline — in which he presumably included “constant supply of imported basic of July 31. The following day, the the major food purchases that have commodities that have been Zimbabwe Electoral Commission been necessitated by the collapse of augmenting local supplies”, said announced that the vote would be the country’s agriculture. Ndlovu. held on June 27. The immediate result of freeing up He explained that high tariffs, which the exchange rate was a massive in some cases reached 100 per cent loss of value for the Zimbabwean of an item’s value, was reducing the ZIMBABWEAN DOLLAR PLUMMETS dollar as it hurtled towards its true amount of goods imported into market value. Zimbabwe. Until then, that had For the past two weeks, the banks and seemed to be precisely the point of other financial institutions have been punitive duties — to stop scarce busy as people rush to exchange foreign currency going abroad to buy foreign currency, especially United Central bank announcement imports, and to attempt to reduce a States dollars, for Zimbabwean money. sent people rushing to the trade deficit caused by the banks to exchange money. depressed export capacity of this Since the Zimbabwean dollar has unproductive economy. become increasingly worthless in recent years, this was a major turnaround. Basic items like foodstuffs, soap, toothpaste and washing powder It followed an announcement by Gono made his announcement on a have been in short supply on the Gideon Gono, governor of the Reserve Friday, when the rate was still posted official market since last July, when Bank of Zimbabwe, RBZ, on May 2 as 30,000 to the US dollar. When Mugabe ordered all businesses and that the currency would no longer be trading resumed on Monday, May 5, industries to cut the prices of goods traded at a fixed rate. the official rate leapt to nearly 169 and services almost in half. This million, not thousand, to one. crude anti-inflationary measure proved counterproductive as goods That meant that all of a sudden, the disappeared from the shelves in People rushed to exchange authorities had access to significant panic-buying and shops could not amounts of hard currency that would afford to restock. Zimbabwean currency at previously have passed them by. the banks after the central Illegal currency trading was all but bank chief announced a wiped out as black marketeers radical shift in policy. struggled to keep pace with the banks. People who would previously Second major policy change have sold foreign currency on the lifted import duties on vital black market because the banks commodities. Gono acknowledged that the current offered such a ridiculously low rate exchange-rate mechanism was not were now opting for safer and legal working. Until that point, the official transactions on advantageous rate had been held at 30,000 to the US terms. dollar since September 2007. Before Since the restrictions on acquiring Gono’s announcement, the By May 16, one American dollar was foreign currency curbed the ability of Zimbabwean currency was trading at worth 255 million or so of the commercial firms to buy from abroad, upwards of 100 million to one Zimbabwean currency. much of what was available in American dollar on the illegal black Zimbabwe was supplied to markets market. and street vendors by informal cross- border traders. HIGH IMPORT DUTIES SWEPT He said the foreign exchange market AWAY had to work properly if the country was The suspension of customs duties to achieve economic stability and cut immediately sparked a stampede to inflation. Year-on-year inflation was On May 13, government spokesman the borders with neighbouring somewhere over 150,000 per cent at Sikhanyiso Ndlovu announced a South Africa, Mozambique, the last count. second major policy reversal. Import Botswana and Zambia, as people duty charges on basic commodities used their new freedom to buy The central bank chief noted that over including cooking oil, rice, salt and goods abroad either to stock up at 80 per cent of Zimbabwe’s imports margarine were scrapped with home or to resell as a way of were items of crucial importance like immediate effect until August 12. making some extra income. 2 ISSUE 30 ZIMBABWE CRISIS REPORTS POLITICAL CALCULATION gimmick to hoodwink voters as the EXTRA GIFT FOR FARMERS country braces for a run-off.” The liberalised economic environment An increased supply of foreign In his statement, Gono also gave created by the currency flotation and currency in the banking system will notice that the fourth phase of the this week’s lifting of customs duties allow the government to import food “mechanisation programme” — which clearly has a political backdrop. and pay Zimbabwe’s neighbours for provides farm machinery in rural areas electricity supplies, assuaging hunger — would be unveiled in July. Ahead of The increased impoverishment of and avoiding embarrassing blackouts the March 29 elections, Gono used much of the Zimbabwean population is in the midst of a crucial election. Many RBZ funds to hand out tractors, ox- perhaps the main driver of wide-scale regional states have grown impatient drawn ploughs and other farming public discontent with Mugabe, and with the government’s late payment of equipment. the reason why he performed so electricity bills. poorly in the March 29 polls. Despite its apparently iron grip on the country, Mudzengi suggested that access to his ZANU-PF party was defeated by foreign currency would help the the MDC in the parliamentary election, authorities bankroll their election “Gono needs to find hard even losing seats regarded as safe. campaign. currency for a lot of things, including running the According to John Robertson, an independent economic and political election and importing Authorities need to analyst, “The government needs food” analyst John recapture support even in foreign currency for a lot of things, Robertson. traditionally safe seats. among them to repay the FCA [foreign currency accounts] of embassies and international organisations that were raided by the RBZ before the March ZANU-PF has traditionally drawn its 29 elections.” support from rural voters, while the Now the security forces and ZANU-PF MDC was seen as more urban- militias have been deployed in a based — at least until the recent campaign of violence in a bid to break elections, when it out-performed the support for the opposition ahead of Mugabe “has his eyes on ruling party even on its home the second round. the presidential run-off” — ground. political analyst Ernest The currency and duty measures add Nelson Chamisa, spokesman for a carrot to the stick now being wielded Mudzengi. Tsvangirai’s faction of the MDC, said by the authorities.