Zimbabwe Part I

In the West, many of us think that we know the Zimbabwe story and it goes something like this. The prosperous colony of Rhodesia was abandoned to its fate by the British as they succumbed to socialism after World War II. Ian Smith, the leader of Rhodesia, was condemned by the West for seceding from the British Commonwealth, but he stubbornly refused to let Rhodesia be overrun by Marxist revolutionaries. Abandoned by the West for continuing with Apartheid, he was eventually cajoled into accepting a peace where Robert Mugabe was elected as president.

During Ian Smith’s rule, Rhodesia was one of the wealthiest countries in Africa and was seen as the bread-basket of the continent. Besides foodstuffs, it was a sizable exporter of minerals and served as a bulwark against Communist influence in the region. In two short decades, Mugabe destroyed a century of hard work by the original settlers. He confiscated white farms to redistribute them to his cronies, whereby the whole farm economy collapsed. He then targeted industry in a mad plan to “indigenize” the country. After he finished destroying most of the productive businesses in the country and chasing the last few educated people from Zimbabwe, the economy deteriorated into a hyperinflationary mayhem that lasted almost a decade. Even his own black African supporters finally decided that he had to go, but despite losing two consecutive elections, he’s somehow still president of Zimbabwe—a depressing shell of its former self as Rhodesia. At least, that’s what I expected the story to be when I arrived in Zimbabwe.

Over the course of a week in Zimbabwe, I met with dozens of black and white Zimbabweans (I was surprised to find that there were still about 30,000 whites in the country), and came away with a much more holistic view of the last thirty years of Zimbabwean history. To start with, most of what I had read in the Western press was only partially true. Even more interestingly, I found a country that was not awash in anarchy—if anything, I was highly surprised by just how developed the economy still is.  Despite chronic privations, the businesses seem to muddle along. I’m not going to say that things are run well—they aren’t—but it isn’t the complete chaos that I expected. I also found a country that is trying to rebuild. With a change of leadership at the top, Zimbabwe could be primed for explosive growth out of a very depressed state. Mugabe is 87 years old and in failing health. Have things bottomed out? Could the turn have already occurred? Is there a recovery trade?

My view out the window of our Holiday Inn in Mutare, Zimbabwe. Incidentally, Holiday Inn has no record of any location in Mutare. Same logo, even gives out fake Holiday Inn rewards points, but not a Holiday Inn–try wrapping your mind around that one…When we called corporate to complain that the air conditioning hasn’t worked during this decade, they had no record of the Holiday Inn either. The website claims that there is one, but if you try to book, it says that it doesn’t exist. Just one more riddle inside the enigma that we will call Zimbabwe…

Mutare, Zimbabwe looking in the other direction. It really is a beautiful country.

After dozens of conversations with Zimbabweans in the business sector, I have a new understanding for the Mugabe years and it goes something like this. Despite fond and distorted memories to the contrary, Rhodesia was not a vibrant economy when Mugabe took over. By the time of the handover in 1980, Zimbabwe had suffered through 14 years of sanctions and guerrilla warfare. What was left was an economy designed to survive in a warzone without the need to trade with those outside of Zimbabwe. There was a level of self-sufficiency which made the white Zimbabweans proud of their ability to ignore foreign sanctions, but the country was in no way competitive with the outside world. Furthermore, by the time that Mugabe took over, the educated white community had already dwindled to 300,000 people. Upon handover, the white community immediately shrunk again as whites fled in terror of the sort of reprisals that neighboring Mozambique meted out against its former white colonists. Therefore, Mugabe took over a country already in a difficult position.

White and black accounts differ somewhat, but it does sound like Mugabe reached out to the white community offering them jobs in the government and a substantial stake in the future of the country as he realized that the whites were the only ones trained to run the government apparatus or even the water, trains and electricity. For the most part, Mugabe was rebuffed by the whites who withdrew into their own community with a hardened resolve to continue the fight against him through political methods. While this was playing out over nearly a decade, Zimbabwe was the star of the liberal western community which was overjoyed to see an apartheid régime overthrown. Starry-eyed with thoughts of convincing South Africa of the benefits of giving up Apartheid, Zimbabwe was showered with foreign aid and low cost loans, despite obvious signs that much of this money was siphoned off into Swiss bank accounts and used for Mugabe’s own private genocide against his political rivals in the Ndebele tribe in the south of Zimbabwe.

Robert Mugabe

During the 1980s, there was a short lived uptick in the Zimbabwe economy due to an end of sanctions and massive quantities of foreign aid. However, the fall of communism and the end of the Mozambique civil war substantially reduced the West’s desire to continue funding internal feuds and Swiss bank accounts. As the aid tapered off, it was obvious to all that the NGOs of the world had given horrid advice to Zimbabwe and suckered the country into accepting sizable loans to build worthless infrastructure. Eventually, the economy began to deteriorate under the weight of these loans, at which point the white community sensed a chance to affect change. They strongly supported the opposition party, at which point Mugabe decided to crack down on the opposition and the whites in particular. To a nation hardened by colonial racism, the few remaining whites made for easy scapegoats and their farms were targeted by government backed hooligans who looted the farms, killed the owners and workers and generally left the farm economy in disorder. The West, once again was enamored by the concept of wealth redistribution—especially if it had vaguely racial overtones and they egged Mugabe on to be more aggressive. While average black Zimbabweans were given small farms, the vast majority of the best land passed on to a few top officials who had no desire or ability to operate them.

Fresh with monetary success from stealing the whites’ farms, and envious of the riches gained by a few well connected blacks using South Africa’s Black Economic Empowerment laws, Mugabe’s cronies decided to target the mines and industry next. All whites were required to give 51% of their assets to blacks that were considered “indigenous.” Needless to say, this discouraged any desire to reinvest in plant and equipment. Instead, most industries embarked on a rapid plan of asset stripping, trying to get anything out of the country before Mugabe’s buddies stole it. In a cause-and-effect relationship, this further justified Mugabe’s claims that the whites were only stealing the country’s wealth.

Typical Zimbabwean farm after land distribution.

Former white farmer’s tractor, now rotting in the field. What used to take a single farmer a few days to do, now takes dozens of people, weeks to accomplish. I’m normally disgusted to see humanity move backwards a hundred years, but as our driver pointed out; “think of how many jobs this creates!”

Starved of export earnings from the farming, mining and export sectors, the economy careened out of control and the Central Bank was left with few options except printing money to finance the government. Some Zimbabweans seem to have felt sorry for the position that the government was in, but most people were of the opinion that the government finances would have been adequate, had the top officials not been stealing most of the money to begin with. Of course, inflation is a great path to wealth if you can find a way to borrow money in rapidly depreciating local currency to buy real assets. This seems to have been the perfectly legal way that most mid-level government officials made fortunes.

Everyone has seen the funny images of little kids with bundles of Zim Dollars. Unfortunately, that was a fact of life for most Zimbabweans for nearly a decade as the number of zeros on the currency rapidly increased. It got so bad, that finally the government accepted the obvious and made the US Dollar into legal tender. At this point, the US Dollar was already the prime medium of exchange—even if it was illegal to transact in Dollars. On dollarization, the economy effectively rebooted. There was a short period of chaos, where people did not know how to price things, but eventually, prices normalized at a very low level. Even two years later, Zimbabwe is one of the cheapest countries that I have ever visited. The financial wealth of the nation was effectively destroyed, even though much of the physical wealth remains.  Amazing as it may seem, most businesses learned to survive hyperinflation and a barter economy. I will talk more about that in Zimbabwe Part II.

With a very limited supply of US Dollars in the economy, the nation has been forced into a very aggressive period of deflation. What is left is a country with impressive roads, buildings and infrastructure, but none of the working capital needed to operate them. Surprisingly, things seem to function—but at a subdued level. The country is amazingly safe and the people seem hard working, if given any sort of leadership at all. What’s lacking is capital and the desire for anyone to do anything sizable enough to be noticed by the authorities and targeted for extortionary levels of corruption. Everywhere we looked, assets were cheap. If you can hold onto them between now and when Mugabe dies, you might do very well if the following transition isn’t a complete maelstrom. As foreigners, the specter of “indigenization” hangs over everything that you do, but there is a phalanx of politically-connected Zimbabweans willing to take a free 51% of anything you buy. Some of them are even willing to pay something marginal for the right to your 51%. Quite honestly, at these prices, your remaining 49% could appreciate substantially.  While you shouldn’t invest big money into such an unknown, given asset values, it seems worth it to take a flier on some assets—especially because I cannot really imagine things getting much worse than in 2009, but that’s all for Zimbabwe Part III—playing it.

Returning to my narrative, I found most Zimbabweans generally baffled at how it had all gone so horribly wrong. Even more importantly for the future recovery, people seem to have a highly skeptical view of foreign advice. It seems that many of the top government officials generously lapped up Western liberal ideals of wealth redistribution somehow growing the economy. Future government leaders now realize that revolutionary Marxism will only impoverish your country. I also saw a lot of finger pointing. There is a general resentment against the World Bank and IMF for giving bad advice and in particular, there is a strong hatred of the British who are seen as the prime cause of much of Zimbabwe’s current pariah status. It seems that when the Lancaster House accords were signed, handing the country over to black rule, the British forced the White settlers to agree to a ten-year period of land reform that would be financed by the British government. Unfortunately, when the ten years were up, a new government ruled in the British parliament and they boldly told the Zimbabweans that it was the last government that had agreed to this—you’re on your own.  With promises of land reform, and no way to pay for them, Mugabe felt compelled to act anyway—it was the last act in pushing a struggling economy over the edge. In the end, while Mugabe is the villain of the whole Shakespearean tragedy, you feel a certain sorrow for him as he frequently was responding to events beyond his own control—precipitated by promises given decades before. He started off as a leader who genuinely tried to guide his country in its first years of freedom, but was manipulated by aides and coerced by foreign governments into making decisions that made no sense, and ultimately destroyed his country.

I expected most Zimbabweans to hate Mugabe. Instead, there was a general view that his presidency had three phases that are conveniently encapsulated into his three decades of presidency. Phase 1 was a success as he guided the country through to black rule; however the seeds of catastrophe were planted by foreign government organizations giving horrible advice and manipulating the situation for their own publicity back home. Phase 2 was when Mugabe tried to implement policies that had been agreed to years earlier—only to find that the financing for them had been removed. There is a general acceptance that he tried his best but was used by the foreigners. Finally, the 3rd phase was simple mayhem as Mugabe was used by his aides. It’s only the third phase that anyone seems genuinely upset about. While there is a general view that Mugabe has to go in order for the country to recover, there is still a genuine admiration for the man and a hatred for those whom he has surrounded himself with. Everyone is of the opinion that things should have turned out differently, but the tragedy is that it didn’t.

I’ve heard lots of negative jibes about thirty years of Mugabe rule; affirmative action on acid, wealth redistribution for the politicians and a country run by Berkley College socialist doctrine. Even the most cold-hearted capitalist side of me realizes that the country couldn’t succeed in a situation where less than one percent of the country’s former white colonists owned 99% of the country’s wealth. Clearly something had to have been done to “fix” this. In a final piece on Africa, I’ll explore how other countries dealt with similar post-colonial problems. To sum it up; almost no plan could have been worse than what Mugabe undertook. In his defense, he put his Westernized mind to work reading white papers by liberal think-tanks and then did exactly what they told him to do. How was he to know that despite their fancy degrees and models, they weren’t qualified to run a hot dog stand?

In summary, Zimbabwe was not what I expected. I think there’s a real chance that there’s a sizable recovery in the future as deflation finally reaches its zenith and businesses slowly regrow. There is an old saying that “markets can remain irrational for longer than you can remain solvent. “ I’d like to add a new query to that theory. “Can Mugabe stay in power for longer than you can remain solvent?” Then again, this is Zimbabwe, given what it’s gone through in the last few years, just about anything is possible.

Categories: Travels
Positions Mentioned: none

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