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Friday, 7 September, 2001, 16:19 GMT 17:19 UK
Zimbabwe's economic crisis
Land seizures are just a part of Zimbabwe's economic trials
By BBC News Online's Jeremy Scott-Joynt

Zimbabwe's economic meltdown is the main trigger for President Robert Mugabe's decision to make a deal on land seizures.

"If there is a turnaround, we will reactivate our activities very quickly... We know there are a number of companies in South Africa which are interested in investing, and we would co-invest with them

Peter Woicke, International Finance Corporation
And the pressure has come not from international institutions or industrialised countries, observers say, but from fellow African leaders.

"I believe that South Africa, and particularly Nigeria's President (Olusegun) Obasanjo, have realised that African leadership is needed," Peter Woicke, managing director of the World Bank and vice president of its private finance arm the International Finance Corporation, told BBC News Online.

And should the deal mean that Zimbabwe's economic mistakes begin to be corrected, the IFC is ready to go back in short order.

"We have always believed in the country," Mr Woicke said. "If there is a turnaround, we will reactivate our activities very quickly.

"We know there are a number of companies in South Africa which are interested in investing, and we would co-invest with them."

With this in mind, it is President Obasanjo, along with South African President Thabo Mbeki, who have been the main players in persuading President Mugabe to make a move.

And the trigger for their more active involvement is economic.

A success story undermined

Once the economic success story of Southern Africa, Zimbabwe was the only regional player to export food to Ethiopia during the drought in the 1980s.

Its economy was doing well, its people were well educated and richer than many of their regional peers.

But over the last five years things have got harder as urban areas ceased to create jobs and rural areas felt the pressure too.

Zimbabwean President Robert Mugabe
Mugabe faces elections next year and food shortages before then
Cronyism by political elites has increased, and the war in the Democratic Republic of Congo and the focus on land reform has been used to try to divert attention from domestic tribulations.

Now, according to one Southern African economist, the country is "a financial basket case".

"The crop has been lost this year, production has been lost, earnings are gone," he said.

In tatters

The International Monetary Fund ceased lending two years ago, along with almost all Zimbabwe's international aid.

Help offered recently by Libya with oil supplies can only fill a small part of the shortfall.

Even on a best case scenario, Zimbabwe's grain harvest, badly disrupted by the land seizures, is unlikely to support the country much beyond the end of the year, the UN Food and Agriculture Organisation has said.

Much of its manufacturing and other industries are in tatters, not least because businesses which are not supporters of the ruling Zanu-PF have frequently found their plants and employees attacked by either Zanu-PF activists or the so-called "war veterans".

Fuel is scarce, with much of what is available going to feed Zimbabwe's hugely unpopular involvement in the war in Congo.

Beggar your neighbour?

And now the side-effects are hitting its neighbours.

South African President Thabo Mbeki
Mbeki: fears Mugabe threatens "African renaissance"
South Africa has suffered the most, with its currency, the rand, dropping to all-time lows against the dollar as investors fear the land crisis will be replicated in the "Rainbow Nation".

Zimbabwe is, after all, South Africa's biggest trading partner in Africa, and the collapse in its economy has had a severe effect on the trade balance - not to mention the millions of rand owed to South Africa by Zimbabwean businesses.

That, many people believe, has forced the hand of President Mbeki in particular.

"The situation has become economically so bad that leaders in Africa - Mr Mbeki and Mr Obasanjo - have probably realised that this reflects badly on the whole continent," said Mr Woicke.

And South Africa's clout over Zimbabwe has been increased by the grain shortage, since much of the grain Zimbabwe needs to import over the next few months will have to come by rail from South Africa.

"Till now it's been constructive engagement," one South African analyst said. "But all South Africa has to do is say that there's a problem with the rail link. If the trains stop, Zimbabwe starves."

On the ground

Nigerian President Olusegun Obasanjo
Obasanjo: prime mover in Zimbabwe talks
According to officials who were at the Abuja meeting, much will depend not on the words on paper, but on the implementation of the deal.

If Mr Mugabe's government holds to the deal - and it is contingent on funding coming from sources including the UK, which promised two decades ago at Lancaster House in London to underwrite land reforms - then the food crisis at least could be eased.

An aid programme to be run by the UN Development Programme is a part of the package agreed in Abuja.

But the devil, the officials say, is in the detail. And little can be done in the short term to help the Zimbabwean economy out of the huge hole in which it finds itself.

And it may not be until after presidential elections due next year that any substantial change comes.

"None of this alters the fact that the country is in an absolutely critical condition," one economist said.

"It looks like the downward spiral of self destruction has been arrested, at least for the moment," he said.

"But it doesn't remove the problem that Mugabe will have to go for Zimbabwe to have a chance of stabilising properly."

World Bank's Peter Woicke
"This is an important step in the potential turnaround of Zimbabwe"
See also:

06 Sep 01 | Africa
Zimbabwe deal: Mugabe's U-turn
07 Sep 01 | Africa
Zimbabwe commits to land deal
07 Sep 01 | Africa
Text of Zimbabwe agreement
06 Sep 01 | UK Politics
Straw 'realistic' on Zimbabwe
05 Sep 01 | Africa
Zimbabwe welcomes farmers' offer
20 Aug 01 | Business
Fresh blow to Zimbabwe tourism
16 Aug 01 | Africa
Diplomatic options over Zimbabwe
02 Aug 01 | Africa
Zimbabwe targets more white farms
20 Jul 01 | Business
Zimbabwe hit by rising grain prices
18 Jun 01 | Business
Zimbabwe on the verge of collapse
13 Jun 01 | Africa
Fuel prices surge in Zimbabwe
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