Zimbabwe suffers an elite transition while economic meltdown looms

In Zimbabwe’s cities and towns, hundreds of thousands of citizens joyfully took to the streets on Saturday, approving a Zimbabwe Defence Force military coup that resolves a long-simmering faction fight within the ruling party and ends the extraordinary career of Robert Mugabe.

After more than 37 years in power in the southern African country he led to liberation in 1980, Mugabe was replaced by a long-standing Zimbabwe African National Union (Patriotic Front) (Zanu-PF) comrade, Emmerson Mnangagwa. To ease the exit, Mugabe might be offered exile in South Africa where his family and cronies possess abundant luxury real estate, such as a mansion bordering the Zimbali estate near Durban’s international airport.

Mnangagwa is widely mistrusted due to his responsibility for (and refusal to acknowledge) the Gukurahundi massacre of more than 20 000 people, mainly members of the minority Ndebele ethnic group from 1982-85, as well as for his subversion of the 2008 election and close proximity – as Defence Minister – to widespread diamond looting from 2008-16.

Indeed Mugabe himself last year complained of revenue shortfalls from diamond mining in eastern Zimbabwe’s Marange fields: “I don’t think we’ve exceeded US$2-billion or so, and yet we think that well over US$15-billion or more has been earned in that area.”

Not only was this vast scale of theft confirmed by local anti-corruption campaigner Farai Maguwu. In order for Mnangagwa to set up the main Marange joint venture – Sino Zimbabwe – with the notorious (and now apparently jailed) Anjin Investments boss, Sam Pa, the army forcibly occupied the Marange fields. In November 2008, troops then murdered several hundred small-scale artisanal miners.

As a result, concerns immediately arise that celebration of the coup and at least momentary popular adoration of the army will relegitimise a brutal Zanu-PF network and thus slow a more durable transition to democracy and economic justice. Aside from a popular revolution, the only other safeguard would be the urgent appointment of a genuine national unity government that could acquire desperately-needed cash from both China and the main Western donors in Washington and the European Union.

For Zimbabwe is broke. Late last year, $200-million worth of a dubious new currency (the ‘Bond note’) was introduced by the Zimbabwe Reserve Bank. The reason was that officially-accepted US dollars and South African rands, which most Zimbabweans have used since 2009, fell into increasingly short supply, causing payment-system blockages and renewing fear of hyper-inflation.

Beijing’s Global Times, which often parrots official wisdom, became increasingly wary of Mugabe. According to a contributor, Wang Hongwi of the Chinese Academy of Social Sciences, “Mnangagwa, a reformist, will abolish Mugabe’s faulty investment policy. In a country with a bankrupt economy, whoever takes office needs to launch economic reforms and open up to foreign investment… Chinese investment in Zimbabwe has also fallen victim to Mugabe’s policy and some projects were forced to close down or move to other countries in recent years, bringing huge losses.” (Hongwi did not mention whether Sam Pa represents the ethos of such Chinese investors.)

Mnangagwa is not only being toasted in Beijing, but also by Tory geopolitical opportunists in London. Although many Britons object, their ambassador to Zimbabwe Catriona Laing has for three years attempted to “rebuild bridges and ensure that re-engagement succeeds to facilitate Mnangagwa’s rise to power” with a reported “$2 billion economic bail-out.”

There is every reason to fear that while launching “economic reforms” to amplify business power, the post-Mugabe Zanu-PF rulers will amplify old habits, combining state asset stripping, repression and profiteering. This is likely if the financial crisis continues into the Christmas season and donor aid is not forthcoming.

Economic barriers to bureaucratic looting are periodically reached in Zimbabwe – e.g. when the world’s worst hyperinflation wiped out the former currency in 2008 – and new arrangements are required (in that case, the turn to the US dollar and rand).

Today, hoarding hard currencies under the matrass represents one form of stored value during crisis, since placing them in bank accounts risks Reserve Bank seizure. Other desperation strategies include rapid purchases of consumer durables each pay day, as well as raging speculation in Bitcoin, real estate and the Zimbabwe Stock Exchange, which was the world’s fastest-rising bourse in 2017 despite rapid economic decline.

For nearly two decades, the Zimbabwe government has been in default on $9+ billion of international debt and today is failing to pay foreign corporations profit remittances they are due. Even state restrictions against importing those basic goods that should instead be manufactured within Zimbabwe failed to ease the currency shortage.

Two of the most crucial economic decisions the next government will face are whether to continue introducing $300-million worth of fast-devaluing Reserve Bank currency into the banking system this month, and whether to honour a massive fine due to the US Treasury’s Office of Foreign Assets Control. Donald Trump’s Treasury Secretary, Steven Mnuchin (formerly of Goldman Sachs), is demanding immediate payment of $385-million – down from an initial $3.8-billion – by the country’s largest bank, Commercial Bank of Zimbabwe, following more than 15 000 separate cases of sanctions busting that date from the Bush and Obama regimes’ punishment of Mugabe for human rights violations.

In a third financial controversy, the Movement for Democratic Change’s 2009-13 finance minister Tendai Biti suspects that his immediate successor, Patrick Chinamasa, fraudulently issued Treasury Bills and backed up the new currency with illegitimate African Export-Import Bank loans. Biti is calling for a full debt audit.

To make matters worse, those whose savings were in the Harare stock market discovered that the coup week’s uncertainty left them 18% poorer, as the shares’ capital value fell from $15.1-billion to $12.4-billion, caused mainly by international investor panic selling.

In this context, says University of Zimbabwe law scholar Munyaradzi Gwisai, “There’s a potential that the Mnangagwa, MDC elites and the military could be part of a national unity government. Ultimately they are also scared of the working class, because austerity could lead to revolts.”

Patrick Bond teaches political economy at the Wits School of Governance. He is the author of Uneven Zimbabwe: A study of finance, development and underdevelopment (1998) and co-author ofZimbabwe’s Plunge: Exhausted nationalism, neoliberalism and the search for social Justice (2003).

Patrick Bond
Guest Author
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