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11 Nov 2007 09:40
Zimbabwe marks the 10th anniversary this week of “Black Friday”, when its currency plunged a record 72%, an episode widely regarded as the precursor of its subsequent economic meltdown.
Under pressure after street protests by former guerrillas who were demanding payment for their role in the 1970s liberation struggle, President Robert Mugabe ordered unbudgeted payouts for 50 000 of the war veterans.
The Zimbabwe dollar fell by 71,5% against the greenback, while the stock market crashed by 46% as investors rushed for the United States dollar.
Since then, it’s been downhill all the way, with inflation the highest in the world at nearly 8 000% and widespread shortages of basic commodities such as fuel and sugar in a country that had been a regional breadbasket.
Emmanuel Munyukwi, chief executive of the Zimbabwe Stock Exchange (ZSE), vividly remembers the events of November 14 1997.
“I remember people crying on that day because then 25% to 30% of our investors were foreigners, and when these foreigners started offloading their shares, our stocks got hammered,” he said.
Since then, the overall value of stocks on the ZSE has been stuck at about $2-billion. “In fact, we haven’t moved in real terms since that day,” Munyukwi added.
Many analysts saw the events of a decade ago as a clear signal of the government’s willingness to buck the laws of economics for short-term expediency, a trend that continues to this day.
“We have been consistently doing things economically wrong for the past 10 years,” said Bulawayo-based economist Eric Bloch.
“It was irrelevant whether or not they [war veterans] deserved the compensation; that wasn’t the issue.
The crisis was triggered by the sudden depletion of foreign-exchange reserves as the Z$50 000 dollar (then worth $1 315) payouts to the veterans impaired the central bank’s capacity to defend the local currency.
According to statistics by Kingdom Financial Holdings, foreign currency reserves fell from $760-million in January 1997 to a then all-time low of $255-million by November. In other words, the bank could only underwrite one month’s worth of imports of all commodities by the end of the year, rather than the three months’ cover it could guarantee at the start.
As well as demanding cash, the war veterans also called on the government to address the issue of land, with most farms still in the hands of the white minority nearly two decades on from independence. After the Svosve people invaded a white-owned farm in November, the government published the first list of farms to be compulsory purchased.
The farmers, however, tried to block the purchase orders in the courts as they believed the sums on the table did not reflect the market value. “The first published list of about 1 471 farms in November 1997 did come as a shock to us,” Trevor Gifford, vice-president of the Commercial Farmers’ Union, recalled.
As the court cases dragged on, the veterans embarked on widescale invasions in 2000. The government did nothing to stop them and later ordered the expropriation of much of the land. There are now about 400 white farmers still operating in Zimbabwe, down from 4 500 a decade ago.
Much of the land has fallen into disuse as the new owners often lacked the means to farm the property. The agricultural sector, once an economic mainstay, is a shadow of its former self.
Bloch said the land issue was handled “in a total disregard for all economic fundamentals or principles”.
Witness Chinyama, a Harare-based economist, said the government has not learned from its mistakes of a decade ago and sees no reason why things will change.
“The government will continue in its combative mood,” he said. “They will continue printing money although it’s inflationary ... They say nobody is assisting us, so what do we do then?”—Sapa-AFP
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