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Last Updated: Tuesday, 25 February, 2003, 08:43 GMT
Zimbabwe slides into economic chaos
by Carolyn Dempster
in Harare

Zimbabweans outside a store
Zimbabwe's economy is not working
In the second of a series of articles on Zimbabwe, BBC News Online reports on the economic collapse of the once thriving nation.

Zimbabwe is running on empty.

Empty political promises, empty fuel tanks, and empty bellies.

Economists now predict that 2003 could bring the crunch point for Zimbabwe, as the country plunges towards economic collapse.

"We are very close to implosion," says Professor Tony Hawkins, head of the University of Zimbabwe's graduate school of management.

"Unless some radical new policies are introduced, one can't see it lasting the year."

Inflation is running at 208%, with the International Monetary Fund predicting that it could rise to more than 500% by the end of the year.

Unemployment stands at more than 70%.

And the chaotic land reform programme has resulted in a 47% contraction in commercial agriculture - once the backbone of Zimbabwe's economy.

At least 7.2 million out of Zimbabwe's population of 12 million is at risk of starvation, with deaths from Aids-related illnesses "peaking at about 2,500 per week", says Stephen Lewis, the UN's special envoy on HIV and Aids in the region.

Zimbabwe's ruling Zanu-PF government has reverted to price controls in a desperate bid to rein in inflation.

It has adjusted the official exchange rate for its currency, moving it closer to rates paid on the black market.

Economy unwinds

But the drive is not working.

A 500 Zimbabwe dollar note
The 'Ferrari' of Zimbabwe dollars

In every city and town, there are few essential foodstuffs - even sugar, salt and the staple maize meal - on offer at affordable prices.

"Happy queue year" is the greeting Zimbabweans grimly exchange as they join the queues which can last for hours, or even days.

Zimbabwe's economy is visibly unwinding.

Fast money

The only business that is booming is the parallel foreign exchange market.

At the original exchange rate, US$1 used to buy 55 Zimbabwe dollars. Now the government has set the rate for exporters at 800 Zimbabwe dollars to the US dollar.

On the streets, black market traders offer up to 1,500 Zimbabwe dollars for US$1.

The red 500 Zimbabwe dollar note is jokingly referred to as a "Ferrari" because it drops in price so fast.

And at the last count there were nine different exchange rates in operation in the economy, being applied in a variety of ways.

Different rules

Political patronage and corruption is spawning the growth of a rich and crooked business elite whom Mr Hawkins describes as the "crony capitalists" of President Robert Mugabe's regime.

Queuing for petrol
Zimbabweans have got used to queues

"There are different rules for different players," says Mr Hawkins.

"Some people just ignore price controls, and they are politically well connected and that's alright.

"Some of the banks do pretty much what they like and that's okay because they are politically well connected.

"The normal rule of law no longer applies."

Budget maths

Ironically, there has been a 400% rise in property prices, because people do not trust the banks, and invest their money in fixed assets in the hope that, following political change, economic prosperity will return.

Those who have the cash are splashing out on luxury vehicles, imported goods and expensive living.

Everything is available on the black market, if one can afford it.

For a newly qualified teacher, a monthly stipend of 56,000 Zimbabwe dollars does not go far, and in spite of promises of increases, teachers' salaries have now been frozen by the government.

Yet in its 2003 budget the government managed to find the resources to earmark 76.4bn Zimbabwe dollars for defence - allocating almost twice as much to security agencies as to land, agriculture and rural resettlement.

The equation was not lost on teachers.

"If they are going to be giving chiefs vehicles, if they are going to pay militias allowances, why not teachers, who are citizens like anyone else," asks Raymond Majongwe, secretary general of the Progressive Teachers Union.

"Even if it means them printing the money, so be it!"

Colgate squeezed

Lance Reynolds, a Harare businessman with interests in real estate and tourism, says he has been forced to revise wages for his employees every few months to keep pace with inflation.

Children with empty bowls
Hunger is a real threat

"We had no choice but to shut down our sail safari operation in Kariba," he adds, reflecting on the 80% drop in tourism revenue to Zimbabwe.

A tube of toothpaste now costs 1,500 Zimbabwe dollars - US$27 at the official exchange rate.

This month Colgate Palmolive, the country's principal manufacturer of soap, detergent and toothpaste, announced it was relocating its operations to South Africa.

It became one of the dozens of manufacturers that have closed down, or moved elsewhere in the region.

Petrol queues

In rural areas, where the drought is taking hold and hunger is already biting deep, herds of cattle are being slaughtered, trees felled for firewood, and wild animals poached in their thousands.

More than one million Zimbabweans have already abandoned their homeland in search of a better life elsewhere.

The two-mile-long queue outside the passport office in central Harare tells a story that the exodus will not abate any time soon.

Says Mr Hawkins: "The critical thing is that there's no economic solution, it's a political solution."

And he says that even if there is political change, radical new policies and renewed support from the donor community, it will take decades to repair the damage done to agriculture and manufacturing.

And it could decades before investors or tourists once again have faith in Zimbabwe.

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