Zimbabwe’s economy lurched into new crisis on Friday as the country’s currency fell 60% in a week and its once world-leading tobacco industry appeared to be heading for oblivion.
At the same time, President Robert Mugabe gave an unexpected insight into his anxiety over the country’s parlous economic state when the state media quoted him as saying that the country’s fuel shortages gave him ”stomach aches”.
He said he would reverse his policy of exclusive state monopoly on the import of fuel and said he would henceforth allow private companies to import fuel — a change for which private oil companies have been pleading for years.
”We crack our heads on importing fuel and have reports every Tuesday about how much fuel we have in the country,” the state-controlled Herald quoted him as saying.
”And what do we do? We call in the multinational oil companies. They sell and make profits. Government does not make any profits.
”Twenty-two years in government, 22 years of playing this game of foolery. They don’t suffer from the headaches and stomach aches I suffer from,” he said.
”They must import fuel and not wait for government to do it for them.”
Observers said the week’s developments were the signs of new pressures tearing at the country’s once-robust economy, after nearly three years of disastrous economic mismanagement and political chaos.
The country’s thriving commercial agricultural industry has been virtually destroyed by Mugabe’s policy of forcing white farmers off their land, while the repression of political opponents has served to switch off Western financial and donor support.
Fuel shortages, the first sign of the country’s hard currency problems, began in December 1999 when the state-owned National Oil Company of Zimbabwe failed to meet payments on arrears to international oil companies for fuel supplies.
Persistent shortages have been relieved in the last 18 months by easy-terms credit from Libya’s Muammar Gadaffi.
However, the Zimbabwe Independent newspaper, quoting oil industry sources, reported on Friday that no Libyan fuel had been delivered for the last six weeks because of Zimbabwe’s failure to meet payments on shipments.
Supplies were being sustained by the recent reopening of credit lines with Kuwaiti suppliers, the newspaper said.
The collapse of the national currency accelerated sharply this week, with currency traders reporting today that one dollar on the semi-official ”parallel” market would fetch 1 500 Zimbabwe dollars, against one dollar to 950 Zimbabwe dollars at the end of last week.
The implication of allowing fuel companies to import and retail to the public at the current levels of the dollar did not appear to have been realised by Mugabe, fuel industry sources said.
NOCZIM runs at an enormous loss, paying for fuel with hard currency, but then selling it for Zimbabwe dollars 76/litre, a price fixed by the government since June last year and now worth five US cents.
”We’ve now got the cheapest fuel in the world because of the government’s ridiculous policies,” said a fuel industry executive.
”If private companies brought it in and charged at the price they bought it for, Zimbabweans would suddenly find themselves paying about 20 times as much as they do now.”
Foreign currency traders said the dramatic slump in the currency’s value was a result of NOCZIM buying hard currency on the parallel market to try and pay for fuel deliveries.
”They need huge amounts of hard cash to keep us in fuel, and they’re in competition for it with the rest of the market,” said one banker.
The situation is expected to worsen sharply with the end yesterday of the six-month auction sales of the country’s tobacco crop, Zimbabwe’s most vital export commodity.
”Tobacco has kept the forex dribbling in. Now it’s stopped, we’re in for a rough time,” the banker said.
Until three years ago, Zimbabwe shared with Brazil the position of the biggest tobacco exporter in the world. Growers on the country’s embattled white-owned commercial farms produced 162-million kg of tobacco, earning $370-million.
As a result of the constant harassment of farmers, output has been shrinking steadily since 1999 when they produced 237-million kg.
During the last three months, police and Mugabe’s militias have carried out a campaign of mass evictions of farmers, and there are now an estimated 350 commercial growers left, out of about 1 500 this time last year.
The Zimbabwe Tobacco Association estimates that output next year will fall by over 50% to only 75-million kg.
”Even that figure is questionable,” said Pat Devenish, managing director of Tobacco Sales Floors, the largest auction company.
”The effect of the land seizures has been huge.”
However, the major European and American cigarette manufacturers who are Zimbabwe’s biggest customers, are expected to continue to buy from Zimbabwe again next year, despite the low forecast crop.
”They have indicated they will be tolerating a shortage for one year,” Devenish said.
”It took us decades to build up a reputation as a reliable, high-quality leaf producer. If we have another short crop after next year, we will go back to being a ‘catch market’ where they buy occasionally, only if it’s a really good crop or the price is very weak.
”If that happens and they pull out, it will be a catastrophe.” – Sapa