The Recent History and Current Situation in Zim

After almost 36 hours of travel, Ken and I arrived safe and sound on Thursday night – just in time to catch the magical 8th inning of Game 2. We wanted to provide some insight into the current political situation and recent history of Zimbabwe but just in case, we decided to wait until we had left. Zim has gone through one of the most spectacular economic collapses in history and while things are moderately stable now, they are a long way from recovery. This basic history is based on many conversations with the people we met there and I have put no effort into verifying any facts (sorry Mugabe, this is what your people are saying…) Zimbabwe is a former British colony that was called Rhodesia (founded by Cecil Rhodes). In the late 70’s, pressure mounted for Zim to gain its independence and after a brief war, they were granted their freedom in ’79. The man who led the fight was Robert Mugabe, the current president. He was hailed as a hero of anti-colonialism all across the region and because of this, he has been given a long leash by his neighbors. The first 18 years with the ZANU-PF party in power were actually quite successful with much investment in the country, building on the foundation of the former colony. Zim was an agricultural powerhouse in the region, had an impressive educational system (literacy rates were among the highest in the world), and was building major infrastructure.

The downfall seems to have begun in 1997 and everyone referred to two separate incidents that triggered the collapse. The first had to do with the “Land Redistribution Program” that was meant to return farms and property to black Zimbabweans. As part of the agreement with Britain during independence, the British Government would provide funding to the Zim government so they could purchase farms and land owned by whites and “redistribute” them to blacks. For some reason, the British decided to cut off this funding in 1997, which infuriated Mugabe. His government then went on a systematic and often violent rampage of invading farms and running people off their land. Coincidentally, Milton went to elementary school with the son of the first white farmer who was murdered for his land.

The second incident that seems to have started the collapse was a massive payment from the government to “war veterans”. Under immense pressure from these “veterans”, who had a lot of power in the military and police forces, Mugabe agreed to pay $50,000 ZW (Zim Dollars), to 50,000 “veterans”. That equated to about US$3500 to 50,000 people, or US$175,000,000 in total. The government did not have this money, and had little access to foreign borrowing, but Mugabe needed the support of these people to retain his power. Overnight, the Zim dollar (which had been relatively stable for the previous 17 years) lost over half its value.

These two incidents led to the massive economic collapse and hyperinflation that Zim experience until 2008. The violent land grab led to massive decline of agriculture since the “farmers” who took over the land had little capital and knowledge to operate a farm. Over this period, Zim went from a place that produced all its own food and exported the excess, to a place with shaky food security and which now relies almost entirely on imports to feed itself.

With agriculture, the economy’s engine, in decline and the local currency losing value, the whole country went into a downward spiral. Without going into too much detail, it’s safe to say that all of Mugabe’s attempts to stabilize the situation failed miserably and only led to further collapse and currency devaluation. At its worst, annual inflation exceeded 1,000,000%. Businesses would literally have to change their prices daily. One restaurant owner said he raised his prices three times in one day. Each morning, the Finance Minister would announce the official exchange rate for the day but out on the street, it was changing by the minute. One man we spoke with, who owns a clothing and shoe store, said he would place calls to local forex traders to monitor the rate throughout the day. A new concept in retail sprouted called “replacement costing”. Typically a shop will set its price based on the cost of the item and what the market will bear. This only works when you can reasonably expect to purchase more of that item at nearly the same price. This isn’t the case during hyperinflation. If a shop pays $20 for a shirt and sells it for $40, that’s great unless it will cost the shop $50 to buy the next shirt. So the shop either decides to no longer sell shirts, or it changes the price of the existing shirt to $70, which is the replacement cost plus profit. This just feeds into the endless cycle of hyperinflation. To make matters worse, one official response by the clueless government ministers against hyperinflation was simply to order (by force) that store owners may not increase their prices by more than 30% per month. So, as it was relayed to us, if on the first of the month, a restaurant owner charged $10 for a steak, at the end of the month, that $10 might now be worth only $0.10, making the new currency-adjusted price of the steak $1000. But the restaurant was forbidden to charge more than $10.30 for a $1000 steak. Same as the shirt store, the choice was to lose money on every transaction, or to stop doing business. Anything the ministers did just compounded the problem and accelerated the inflation rate.

In one conversation with the joiner, he said he would quote a job in the morning, and when he got paid at the end of the day, it was essentially half of what he quoted. With the value dropping so fast, people dealt with foreign currency whenever possible. This was fine until the government made it illegal to possess anything but Zim dollars. All this did was create a black market for US dollars, SA Rand, or Botswana Pula. Even though it was dangerous, every minute you held on to Zim dollars, you were losing money. One of the worst policies that affected the general population was the withdrawal limits placed on banks. Many people’s salaries were deposited directly to their bank account, and checking and credit card systems were nonexistent, so they were forced to withdraw cash for all daily expenses. But the daily withdrawal limit was so low that, at its worst, it was not even enough for a loaf of bread. Couple that with the fact that salaries weren’t increasing to match inflation and you can see the reason the population plunged into poverty.

Another shop owner said he would take his daily sales and go and buy booze and cigarettes since they hold their value. He doesn’t smoke or drink, but he had to get rid of his Zim dollars immediately. The government’s solution was either to print more bills with more zeros (I have a $100 Trillion ZW bill) or to “introduce’ new currency effectively just dropping ‘000’s off. This only caused more havoc and added to the problem. Each person we spoke to would glaze over when telling us these stories. And they all wondered out loud how they made it through. One guy compared it to a woman’s memory of childbirth and how the memory of the pain she experienced gets fuzzy over time.

The worst of this period was 2007 and 2008. Businesses that were only allowed to deal in a worthless currency could not buy from other countries. And with the collapse of almost all local production, shelves were empty and the entire country came to a halt. In 2008, the government finally gave in and announced the “Multi Currency System” where the base currency was the USD, but Rand and Pula were also accepted. It instantly stabilized the situation but it stabilized a bad one. Since then, things have gotten marginally better. After each story, we always asked about their feelings towards the future, and unfortunately there’s not a lot of positivity. Mugabe has stubbornly maintained his power throughout, but under allegations of voter intimidation, severe violence against challengers and their supporters, and outright election rigging. Most people are literally just waiting for Mugabe to die, but others are fearful for the people who will surely follow, since the rest of the current government that has been propping Mugabe up are said to be even more ruthless.

The opposition party, MDC, is headed by the Prime Minister, Morgan Tsvangirai. After winning at the polls in last year’s elections, he withdrew, accusing ZANU-PF of threatening violence. Under international pressure, the two parties came to an agreement whereby they would share power. Mugabe hasn’t exactly held his end of the bargain and pressure is mounting for yet another “free and fair” election. Apparently Mugabe supports this because the rumor on the street is that he finally wants to hand over power during an election, thereby regaining his international respect . Unfortunately, the rumor that accompanies this is that elements in his own ZANU-PF are unwilling to lose power peacefully and that more violence would surely occur.

Through all of this craziness, the people of Zimbabwe are incredible. They remain hopeful for their future, and proud of their nation, despite all its troubles. They are amazingly warm and friendly. They have been through so much hardship that at this point, the general attitude seems to be to shrug (with a smile, even) and admit that there’s not much they can do but make the best of the situation. As one man told us, “Mugabe is in his 80s and I’m in my 30s. I’ll outlive him, and then things will get better.” The people truly deserve better, and they have all the elements to be a great nation again. They only need to be allowed to do it.