Zimbabwe business holds its breath

Paraffin shortage: Sign of the stagnant economy

By Joseph Winter in Harare

Before the elections in Zimbabwe, many business people were saying that if Zanu-PF won, they would shut up shop.

Now that the dust has settled on a very narrow victory by the ruling party, some are reconsidering.

The IMF will be wary about restoring support because it's had its fingers burnt too many times

Foreign diplomat

One of the key questions which will determine Zimbabwe's economic future is the reaction of the war veterans occupying 1,000 white-owned farms around the country.

President Robert Mugabe has always said that they should stay put until they are given land of their own.

But Jerry Grant from the Commercial Farmers' Union, says that this is likely to be a lengthy process as he expects a "considerable number" of the owners of the 804 farms on the list for compulsory acquisition to lodge legal appeals.

The deadline for doing this is 3 July. Officials have warned that "going to court would be pouring oil onto the fire" - but that was in the tense pre-election climate.

Negotiations ahead?

Farmers are hoping that now, with both sides reasonably satisfied with the outcome, the rhetoric and violence will be replaced by rational negotiation.

It is not known when or whether the farm invasions will end

Dr Grant says that many of these appeals should succeed, because 277 farms are the only properties their owners have, and many more farms are highly developed.

The official criteria for taking farms are where land is under-utilised or where people own several farms. Robert Mugabe has repeatedly stressed that "no white farmer will be driven off the land".

Since the results were announced, there has been no movement and there are even rumours of a hit squad targetting white farmers who supported the MDC.

Theft

Dr Grant says that theft has been rampant on the occupied farms. Next year's tobacco harvest will decline by 50,000 tonnes or 22%, while this year's winter wheat crop will also be down 50,00 tonnes, or 15%.

Economist John Robertson says that as long as Zanu-PF and Mr Mugabe are running Zimbabwe, the country will not attract many investors or much donor support.

Mugabe must improve the state of the economy within two years or he faces electoral defeat

Economist Edmore Tobaiwa

But he says that the local business community is heartened by the good showing of the MDC and the absence of the post-election civil strife predicted by many. He says that fewer companies are now considering closing down.

One reason is that the MDC gained just 70,000 fewer votes than Zanu-PF nationwide. If this gap is made up in the next two years - entirely within the realms of possibility - then Robert Mugabe would be defeated in the 2002 presidential poll.

Two years no longer seems such a long wait for many business people.

Devaluation

Mr Robertson says the immediate priority is to devalue the Zimbabwe dollar "within the next week". The rate has been fixed at Z$38 to US$1 for over a year and exporters say this is driving them out of business.

Petrol shortages have hit town and farm dwellers alike

At the moment, it is virtually impossible to get any hard currency in Harare. The gold mining sector which earns 30% of Zimbabwe's foreign exchange has already warned that mines will close down and thousands of jobs be lost if the pegged exchange rate is kept in place.

But will Robert Mugabe accept a devaluation so soon after just scraping home in an election in which he promised to re-introduce price controls on basic goods and blamed the state of the economy on IMF-inspired market reforms? A difficult question which will determine the country's immediate future.

Another economist, Edmore Tobaiwa, hopes that the talk of returning to a state-controlled economy was "just election campaigning".

He says that everything depends on who is appointed to the key economic ministries, as well as the release of over US$1bn, frozen in recent years by international donors.

On this question, a diplomat said: "The IMF will be wary about restoring support because it's had its fingers burnt too many times."

Nevertheless, Mr Tobaiwa is optimistic about the future because "Robert Mugabe must improve the state of the economy within two years or he faces electoral defeat. He has no choice but to act."