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ZIMBABWE: ‘‘Companies Cutting Ties Will Hit Average Person Most’’

Tonderai Kwidini

HARARE, Jul 18 2008 (IPS) - As state violence in Zimbabwe worsens, economists in the capital Harare have warned that cutting international economic ties with the country will hit the average person the hardest.

Statistics from the collapsing southern African country’s ministry of finance released in May 2008 showed that Zimbabwe is in a dire foreign currency situation. Export receipts declined from 2.2 billion U.S. dollars in 2000 to 1,7 billion U.S. dollars in 2006 to 1,5 billion U.S dollars last year.

Following the disputed elections earlier this year, labelled by many African, European and American leaders as a ‘‘sham’’, the demand for further sanctions against Zimbabwe has grown louder.

German company Giesecke & Devrient was pressurised to stop supplying the Reserve Bank of Zimbabwe (RBZ) with special paper used to print Zimbabwe's bearer cheques. These are a form of promissory note introduced to try and deal with the country's rocketing inflation rate.

British retail giant Tesco also announced that it was to stop sourcing fresh beans and peas from Zimbabwe as long as the political crisis continued.

Moves by these international companies are part of the latest measures by western governments to put a squeeze on President Robert Mugabe, who stands accused of imposing himself as leader on Zimbabweans amid escalating state violence.


The poll was judged by observers from the African Union, Southern African Development Community and Pan-African Parliament as not free and fair.

Tesco’s decision not to source farm produce from Zimbabwe will hit small private businesses in the agricultural sector the most. Giesecke & Devrient’s decision will affect the procurement of much-needed food, fuel and other essential imports, John Robertson, a Harare-based economist, told IPS.

‘‘As usual, it is the consumers, not the political culprits, who will bear the brunt,’’ he said.

But Reserve Bank of Zimbabwe governor Gideon Gono sought to allay fears in an interview with the Wall Street Journal, saying the cutting of the supply of bank paper will create hassles but ‘‘there is no need to commit suicide. We are basically prepared for anything that comes our way’’.

It is believed that the government will turn to China for the procurement of paper.

Despite the latest turn of events, several British companies are still doing business in Zimbabwe.

According to company records at the deeds office in Harare, these include Standard Chartered and Barclays Bank, British American Tobacco (BAT), British Petroleum (BP), Rio Tinto and Falcon Gold (Falgold).

U.S. firms such as Chevron and Coca-Cola and some Canadian mining firms are still operating in Zimbabwe, although their scale of business has drastically been reduced.

South African companies still active in Zimbabwe, include Anglo American Corporation, which has interests in agro-industry and mining; Impala Platinum; Metallon Gold; Standard Bank, whose Zimbabwean subsidiary is Stanbic; and Old Mutual, which is involved in real estate and insurance.

Others are PPC cement company; Murray and Roberts construction company; retail concerns Truworths and Edcon ; sugar producing concern Hulett-Tongaat, which has a stake in Hippo Valley Sugar Estates; grocery chains Spar and Makro, and SAB Miller, which has a stake in Zimbabwe's Delta Beverages.

Oil giant Royal Dutch Shell is reported to be considering pulling out of Zimbabwe.

Britain, Zimbabwe's former colonial power, is still the largest foreign investor in Zimbabwe, according to a study done by London-based analysts Ethical Investment Research Services.

British investment fund LonZim said in a notice last month that it will continue putting money into Zimbabwe to finance new investments.

Zimplats, majority owned by Implats South Africa, also weighed in with reassurances, saying it will continue developing its platinum mining assets in Zimbabwe and playing its role in rebuilding the economy for the benefit of the people.

Among Zimbabweans there is an argument that some of these firms have become predators in that they are prepared to suffer losses, hoping that once political settlement is reached they will gain.

But Luxon Zembe, a Harare-based economic commentator, described the moves by international firms to cut ties with Zimbabwe as unfortunate as they will only worsen the plight of ordinary Zimbabweans.

‘‘Right now the economy is operating at about 10 percent of its capacity. Cutting economic ties will have negative implications as it will result in a direct loss of goods and services and employment and will affect the country's gross domestic product negatively.

‘‘The solution to our crisis is purely political. Politicians in this country have to sort out the mess before the economy can start taking off again,’’ Zembe told IPS.

He said politicians in Zimbabwe have failed by not respecting fundamental human rights.

‘‘There is no company in the world that can invest in a country where there is no respect of people's rights. As long as there is no respect for human life, our country will remain in this mess,’’ added Zembe.

John Makumbe, a political analyst and University of Zimbabwe lecturer, argued that companies were justified in pulling out.

‘‘ZANU-PF politicians have failed to run the country by not ensuring stability for the economy. Right now there is a need for the politicians to accept their mistakes. The denial mood will not help us now,’’ said Makumbe.

In recent years, gross domestic product has fallen while inflation has soared. Zimbabwe’s economic growth figures were -4.4 percent in 2002, -10.4 percent in 2003, -3.2 percent in 2004, -4.3 percent in 2005 and -4.7 percent in 2006, according to figures from the International Monetary Fund’s African Development database, published on August 30, 2006.

Although official figures from the Central Statistical Office (CSO) put the country's inflation at 165,000 percent, some analysts believe that it is now well over two million percent.

Wages are not keeping pace with inflation. Barter trade has become increasingly common. Much trade is done on the thriving black market where even basic items are now being priced in South African rand or U.S. dollars.

 
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