Brian Latham Harare
Ephraim Takavarasha sits on the pavement outside Johannesburg’s central bus station, wondering how long it will take him to sell his four cases of electrical sockets, cellphone chargers and alarm clocks when he returns to Zimbabwe.
What was once a monthly 1 200km trip that Takavarasha, 25, took from Harare to South Africa’s commercial hub has become a visit every second month. Cash-strapped Zimbabweans are not spending, deflation has taken hold, factories are being shut and the economy is heading for recession less than a year after President Robert Mugabe, 90, was voted back into office to extend his 33 years of rule.
“I used to spend about $5 000 (R53 000) a month to make a profit of about $1 000 a month as a cross-border trader, but no one’s buying now,” he says. “It’ll take me two months to move this,” he adds, pointing to his cases.
Five years after Zimbabwe emerged from recession, ended hyperinflation by abandoning its currency and spurred farming output, the economy is at risk of contracting again. Foreign currency needed to pay wages and buy imports has dried up, Mugabe’s government has given investors mixed signals on plans to seize company stakes as part of its indigenisation policy, and factories are operating at just 40 percent of capacity.
We’re already in recession and the economy will probably shrink by 1 percent this year,” independent economist John Robertson said. “Even if the government does act on its promise to soften indigenisation laws, it’ll take at least a year before foreign investors build factories or sink mines.”
Hyperinflation, estimated by the International Monetary Fund to have peaked at 500 billion percent in 2008, came to a halt when authorities dropped the Zimbabwe dollar, ending the central bank’s ability to print money to pay the government’s debt. Zimbabwe uses a multi-currency system that includes the US dollar and rand.
The recovery spurred investment from Pick n Pay, South Africa’s second-biggest grocer, and Tiger Brands, the Johannesburg-based maker of food products like Jungle Oats.
It fuelled agriculture, with tobacco output more than tripling to 167 million kilograms in the five years to last year and set to reach 180 million kilograms this year. Production slumped following Mugabe’s 2000 land reform programme that saw the government seizing commercial farms own-ed by white landowners to give to black Zimbabweans, many of whom were subsistence farmers.
That progress is now at risk. Retail sales fell 30 percent month on month in February, while 15 factories in the metals and engineering industries closed in the period, the finance ministry said in a monthly report on its website. Consumer prices declined for a third consecutive month in April, reflecting depressed demand.
“There’s no clear sign of a way out,” said Thea Fourie, an analyst at global business research firm IHS. “It’s pretty bad in Zimbabwe right now.”
The country’s benchmark stock index has slumped 15 percent this year. – Bloomberg