Zimbabwe basket case?

Well-planned land reform would be of great benefit but Mugabe’s panic land grab could spell economic ruin, says Tony Hawkins.

“WHY HAS THE Mugabe government suddenly decided to go populist?” a visiting political scientist asked me the other day. Part answer comes from a black security officer: “Travelling on the bus these days, you realise just how unpopular the government now is,” he observes.

President Robert Mugabe’s renewed populism is embodied in the government’s August announcement of a Z$4 billion (US$240 million) war veterans’ compensation package, and the planned nationalisation of some 1,488 mostly white-owned commercial farms. For the better part of 20 years, both issues — land and the veterans’ compensations — were left to simmer on the backburner of Zimbabwe politics, but suddenly, midway through its fourth term in office, Mugabe’s ruling Zanu-PF party has gone populist.

It could all prove to be too little too late. Eighteen years of near-monopoly power has produced a backlash in parliament, at the Zanu-PF party congress and on the streets. Last month the Zimbabwe Congress of Trade Unions organised the most effective demonstration against the government since independence in 1980. “A sea change is under way,” says a business leader. “Zimbabwe will never be the same again”.

It is now not uncommon to hear parallels struck with President Moi’s Kenya today and President Kaunda’s Zambia in 1991. Real incomes are lower than they were in the mid-1970s; average real wages no higher than when Rhodesian premier Ian Smith declared UDI 32 years ago. Unemployment has trebled and now exceeds a million people out of a population of 12 millions. Mugabe’s 1982 promise to resettle 162,500 families within three years has never been implemented and fewer than half that number were relocated. Promised housing schemes fall woefully short of demand; there is a waiting list of over 110,000 for telephones. School, university and health standards have all declined.

Such realities explain Mugabe’s return to the populism that served him so well at four elections. This time it is different though, because the mood of the country has changed. During 1997 this became increasingly evident as first labour disputes in industry turned violent, to be followed by similar outbreaks in both agriculture and mining. The war veterans took the law into their own hands, forcing Mugabe to concede the compensation package which was one of the two events that sparked a n economic crisis.

The other was the decision to rush the land resettlement programme. Ministers, under pressure from grassroots supporters, have promised to start resettling black peasant farmers on previously white-owned land by August. Just how an administration which is under pressure from the International Monetary Fund to keep its budget deficit under 10 per cent of GDP and which has allocated a mere US$5 million for land acquisition can do this is unclear.

The government’s target is to take over 5.3 million hectares of commercially-owned farmland — nearly half of the total currently owned by white farmers. No timetable has been set, but President Mugabe has said that when the time comes additional farms will be added to the 1,480 already listed.

The Commercial Farmers’ Union (CFU) estimates that commercial farm production and exports would fall 37 per cent and 140,000 black farmworkers would lose their jobs if the resettlement programme goes ahead as planned. Such dire predictions are unlikely to prove accurate because the resettlement programme will have to be phased and because, after a period of severe dislocation, there will be a recovery in output as resettlement farms come on stream. On this scenario, the CFU projects output sliding from Z$14 billion in 1997 to Z$8.8 billion (1997 prices) after resettlement, before recovering to more than Z$11 billion, assuming 700 farms are resettled immediately.

Such assumptions are unrealistic. Acquisition will not take place as rapidly as the CFU’s “worst scenario” assumes, nor will production recover as quickly. On the whole, this is bad news. By dispossessing 1,000 farmers of their means of livelihood (or part thereof) the resettlement programme has already created an enormous crisis of confidence. Farm investment has collapsed; tractor and agricultural equipment dealers’ shops are crammed with unsold and increasingly unsaleable goods as a plunging Zimbabwe dollar and rising interest rates prices them out of the market. At the same time, banks and finance houses have put on hold all lending to farmers on the acquisition list.

The economic implications are disturbing. Agriculture’s importance to the economy is far greater than its 17 per cent contribution to GDP might suggest. It is the largest employer of formal sector labour — 360,000 out of a total of 1.5 million — and it accounts for over 40 per cent of total exports, including the top export (tobacco) and the fastest growing product line (horticulture).

The short-term effects, notably on investment confidence, abroad as well as at home, are extremely serious. Bankers and businessmen are unanimous in their view that Zimbabwe has been crossed off the list for many, if not all, foreign investors. The knock-on effects on other sectors, especially manufacturing, distribution and finance, are also very serious.

Thus farmers owe banks upwards of Z$5 billion (US$280 million), and manufacturing relies on agriculture for fully a third of its inputs. The Heinz-Olivine group, for instance, says that all but two of its suppliers of tomatoes are on the acquisition list. One of the country’s top horticulture exporters has been designated as has most of Mkwasine Estate, which produces sugar and wheat for the Anglo-American Corporation-controlled Hippo Valley Estates and Triangle Ltd, part of the Hulett empire.

Were land redistribution to be carried out as part of an integrated, transparent and properly planned rural development programme, with donor support to fund both land acquisition and the huge cost of resettlement, then while there might be adverse short-to-medium term repercussions, the long-term effects could be hugely beneficial. After all, part of the South Korean success story was land redistribution.

But Zimbabwe’s chances of getting it right are slim. Having missed the opportunity to tackle redistribution and resettlement in the mid-1980s, when the chances of success would have been far greater, President Mugabe now faces a crisis of unfulfilled expectations.

This does not mean that he is about to resign or be forced out of office before his term ends in April 2002. It does mean he will have to choose between rigorous implementation of politically and socially unpalatable IMF/World Bank-style economic prescriptions, or seek political popularity through an economically disastrous populism. There is no donor support in sight at present for him to finance the land programme and stabilise the currency. For this to materialise, Mugabe will have to eat a lot of his words, rethink his strategy and slow down the resettlement process to snail’s pace.

Some in business, and especially the emerging markets fraternity have pinned their faith on an IMF/World Bank rescue package. There are, however, two snags. If the donors are to come riding to Mugabe’s rescue, he will have to execute so radical a U-turn that his political credibility would disappear altogether.

Second, and more importantly, iIn just a few months, the Mugabe government has destroyed investor confidence which will take years to rebuild. IMF, World Bank and donor money might stabilise the currency and prop up his government, but as experience elsewhere in Africa shows all too vividly, it will not provide the necessary platform for sustained economic growth. All it will do is create a donor-dependent community and maintain in office a government that, in the telling words of Professor Milton Friedman, should have been left to wither on the vine.

Tony Hawkins is professor of business studies at the University of Zimbabwe and writes on African economics for the Financial Times.