By Eddie Cross, introduction by Lyle McLean
Lyle and Eddie
Tuesday, Jun 7, 2016
|Paul ... A friend in Zimbabwe passed this along. My dad worked alongside Eddie for many years and will appreciate this report. One question I keep having with all whites from Zim is, why do we keep giving the keys to the candy store to kids and expect them not to eat? The people of Africa cannot and will not live by the standards and monetary system other people in the world developed. It is an impossibility. Their own system worked great for many thousands of years. We certainly couldn't live by their ways of trading ostrich eggs! Once the old guard accepts this and walks away their stress and frustration levels will drop away.
When you look at the mess the USA, Europe, the UK, etc. are in, we can't even live by our own system. There are very few Eddie Cross' in our own world who even understand how it works. Our kids are not even taught economics in school. Once we full pay for the environmental impact of the past 100 years our system will crash. Raise a glass of bubbly today for the next hydro increase is close at hand when no one will be able to afford bubbly, or even water, because we won't be able to afford the hydro to pump it out of the ground.
[Lyle is my most excellent next-door neighbour and a very fine and decent person. He was born in Zimbabwe (when it was still Rhodesia) of Scottish heritage. His father (also Lyle) lived and worked in Rhodesia/Zimbabwe until it became clear that whites were no longer welcome. He now lives in Scotland (and visits us here in Canada regularly).
- prh, ed.]
How much longer can we hold out?
This morning I attended the AGM of Edgars Stores Limited and heard that sales in the first quarter of 2016 were 14 per cent down on last year and that April was worse and that this comes on top of a similar downturn last year. When I left the meeting I had to drive across town to see a couple of local business people and saw long lines of customers outside all the Banks trying to withdraw money.
Then I met with friends who run a number of fuel filing stations and was told that 6 out of 9 suppliers had been unable to supply them with fuel in the past two weeks. Someone who came through Beitbridge said that the border was totally quiet – very little traffic and few trucks. This, at the busiest border post in Africa where normally 700 30-tonne rigs cross every day, along with hundreds of motor vehicles and tens of thousands of people – 6 million a year.
Another businessman told me that they have not been able to pay their suppliers and that this had now reached critical levels. What does he do, he asked me? Do I close my doors?
The meeting of the multilateral financial agencies in Zambia last week came and went without comment on the crisis in Zimbabwe. That says a lot. It says that we were discussed, that the news was not good and that tough issues were raised. If the outcome had been favorable we would have heard it on the propaganda machine by now.
The real question is why have the wheels come off when we had been doing so well during the GNU [Government of National Unity - ed.]? One of the reasons is clearly, that the country has reacted to the resumption of full control of the State by Zanu PF [ruling party of Robert Mugabe - ed.] very badly. But it is more than that. During the GNU the MDC [Movement for Democratic Change - ed.] struggled to get the Government to agree to an audit of the Civil Service. When finally they agreed, an Indian firm was appointed to do the audit but was limited to the 187 000 ordinary Civil Servants – teachers, doctors, nurses and administrators etc. The Security Services (70 000 employees) were excluded – why we did not know, but the audit was something and we went ahead.
In the end we found a few “ghost” workers who could not be found physically but had been receiving salaries, but it was not too bad – 5 000 or so. More significant were the number of people who were in place and were also getting a salary but seemed to have no job. This included 10 000 “Youth Officers” who had been employed a few days prior to an election and were clearly a form of Zanu PF Youth Brigade, employed for electoral purposes and little else.
But the total Civil Service was confirmed at about 258 000 people and the wage bill was about 60 per cent of total revenue. Manageable, but we never got rid of the workers with no job descriptions. We ran a budget surplus each year and our fiscal and economic situation was stable and growing rapidly. There were no cash shortages and the adoption of the US Dollar made Zimbabwe an attractive destination for business and investment.
Then Zanu PF took control of the ship of State. The Civil Service was doubled in size. 'Create jobs', the President prescribed. So they did, employing thousands of young Zanu PF youth who were expecting a dividend from the 2013 electoral victory. Then the President struck again – waved his magic wand and prescribed an increase in civil service emoluments – not by 3 per cent, or 10 per cent, but by 36 per cent, and that in a situation where inflation hardly existed and deflation was coming.
Suddenly the cost of employment by the State surged to 90 per cent of revenue and for the first time in 5 years, the State ran a substantial budget deficit. Expecting the economy to expand and provide more revenue to fund public expenditure, the Ministry of Finance did nothing to trim its sails to the wind, only to discover that there was no wind to drive this particular boat. The commodity “super cycle” collapsed in 2014 and along with it any chance of recovery.
That did not stop the party below deck; they continued to party and feed on caviar and drink champagne as if this was their right. The economy began to shrink, slowly at first and then accelerating – falling in three years from $17 billion in 2013 to $14 billion in 2015. The revenues to the State, despite desperate efforts by the crew on deck, declined until by the beginning of 2016, the cost of employment by the State was 116% of revenues.
Below deck there was a growing unease – those with sensitive ears heard the slowing down of the Ship of State. They heard the stresses in the hull and the desperate cries of the crew above their heads, but still the Captain called on them to continue the revelry – after all, they had won the 2013 election and nothing would stop the party.
The crew, faced with an intensifying storm, higher waves and rough seas, started to throw things overboard to reduce the stress on the ship. However, this just made things worse and they intensified their efforts – eventually even throwing the life boats overboard.
I have explained how the growing deficit between income and expenditure has sucked the cash in the economy out of the Banks and into the pantry, feeding food and drink to the party below the deck. However, this cannot go on forever and eventually the Captain announced that he was going to start making caviar and champagne himself. When this was greeted with disbelief by the revelers below deck, he simply stated that this was surely not difficult. If the finished product did not look like US dollars, it certainly would smell the same and feel the same – all you needed was imagination.
When this news reached the crew on deck, they started to prepare to abandon ship, appreciating the seriousness of the situation and the lack of time and the total incomprehension of the Officers below deck who were by now too smashed to know the difference.
The answer to the question posed in the heading to this note, is “not much longer”. In my view the Banks, without exception, are now virtually unable to meet the demands being made on them by depositors. Under normal conditions, they would be closing their doors and this might start happening at any time. Fearful that when the ship goes down, or hits the rocks and breaks up, that they will be left with nothing to stay afloat with, the people are desperately trying to access their money as quickly as possible.
The one message that needs to get across in this situation is that there is no hope for the party revelers below deck unless they can sober up and get ready to abandon ship like the rest of us. Then those of us who reach the shore, can elect new leadership and start building a new life for all survivors.
Bulawayo, 2nd June 2016
Eddie Cross is a Member of Parliament for Bulawayo South, a renowned Zimbabwean economist and founder member of the mainstream Movement for Democratic Change party led by Morgan Tsvangirai. He is currently the Policy Coordinator General.
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