On the road to economic ruin

Tony Hawkins charts the consequences of Robert Mugabe's fateful decision three years ago to buy off protesting war veterans.

ZIMBABWE'S TOBACCO farmers, some threatened with the imminent confiscation of their land, have had to decide in the past few weeks whether to plant the seedlings that will become next year's crop and foreign exchange earnings.

The Commercial Farmers' Union (CFU), which represents the country's 4,500 mainly white commercial producers, predicts a 10 per cent fall in the value of production this year, and while it has made no forecast for the 2001 harvest, it is already obvious that the decline will be even greater. The Zimbabwe Tobacco Association, representing tobacco growers, says seed sales are down some 20-25 per cent, suggesting that the tobacco crop will fall from the current year's 225 million kilograms to around 175 million kgs.

Caught up in the dramatic and sometimes terrifying events of the past year, it is hard to recall how and why the country has ended up in its present deplorable state. With hindsight one can pinpoint August 1997 as the date President Robert Mugabe set out on the road that now seems destined to transform his country. Then, without consulting his Cabinet, he ordered huge, unbudgeted pension payments of some Z$3.6 billion (US $350 million) to veterans of the country's 1970s liberation war and their dependants. Soon afterwards he threatened to take over chunks of white-owned farmland without compensation.

Since taking office in 1980 Mugabe had followed broadly pragmatic if erratic policies, and these two essentially tactical decisions, both made under pressure from the war veterans, seemed no different. It appeared - wrongly, in the light of subsequent developments - that Mugabe was simply buying off pressure, confident that events would soon allow him to regain the initiative.

But in the months that followed social and economic pressures that had long been building up in the economy gave birth to an effective political opposition for the first time in the country's post-independence history. The strong support for national stay aways called by the Zimbabwe Congress of Trade Unions at the end of 1997 - in protest at the tax hikes imposed to finance war veteran pensions - were the first indication of a changing political mood. At the time, however, few political analysts interpreted these developments as the beginnings of a serious threat to the ruling Zanu-PF party.In November 1997, an initial list of 1,471 farms was gazetted for compulsory acquisition, though in the course of the next year half were "de-listed" because they fell outside the criteria set by the government. This left some 700 properties - now the core of the 804 farms due to be taken over in the second half of 2000.

A year later, following intense lobbying by the CFU, a conference of Zimbabwe's international donors took place in Harare. It agreed that donors would support a land reform programme provided that:

  • the process of implementation was transparent;
  • poverty alleviation was a key goal;
  • it complied with the laws of Zimbabwe;
  • interested stakeholders were consulted.

The programme was to start with an inception phase of 118 farms, taken from the 1997 list of gazetted properties, after which donors would consider stepping up assistance in order to accelerate and broaden the process.

Although all sides - farmers, donors and government - agreed that a seemingly viable compromise had been reached, it was never obvious that Mugabe himself had accepted the plan. Indeed, in November 1998, within weeks of the conference, 841 acquisition notices were delivered in respect of farms that had not been struck off the original list. However, there was a temporary respite when the deepening economic crisis, marked by riots in the capital as inflation hit food prices, forced the government to approach the International Monetary Fund (IMF) for assistance. The IMF's public opposition to compulsory land acquisition meant the government had to back off.

Twice in 1998-99 the IMF made ill-judged stand-by loans to Zimbabwe. In August 1998 Zimbabwe had entered the civil war in the Democratic Republic of Congo (DRC) in support of the embattled President Laurent Kabila. Mugabe and two of his allies within the Southern African Development Community (SADC), Angola and Namibia, justified this as action under the umbrella of the SADC security arm. This huge extra - and again unbudgeted - expenditure worsened an already bad financial situation.

From the outset it was clear that targets specified in the loan agreements could not be met. In mid-1999, when the IMF announced the second loan - that collapsed within three months - it accepted the government's estimate of the cost of military involvement in the DRC of only US$3 million monthly. Many were highly critical of what to them was an attempt by an international organisation to rescue a government whose political fortunes were deteriorating rapidly along with the economy.
The IMF was in good company. World Bank officials promised consideration in September-October of a bank credit - just as the Movement for Democratic Change (MDC) was launched to oppose the ruling Zanu-PF at the parliamentary elections (then scheduled for April 2000). Part of this credit was to be used to restructure Zimbabwe's rapidly growing domestic debt, itself a result of excessive military expenditure. World Bank and IMF officials insisted that their actual, or proposed, loans would not be used to finance military spending in the Congo. It was only after a Western government leaked an official document showing that Zimbabwe had misled the IMF over the cost of the DRC war that both the fund and bank initiatives collapsed.

These developments are central to understanding Mugabe's subsequent behaviour. Since the donor community had abandoned Zimbabwe at the behest of Britain, he claimed, it was obvious that responsibility for subsequent events had passed from Zimbabwe to Britain. Those seeking to restrain Zimbabwe's leader by arguing that there was still a chance of international donor support for land resettlement lost what little leverage they had previously had.

Matters came to a head in November last year when the government demanded that a clause on land be inserted into the draft constitution that had been drawn up by a government-appointed commission. The clause stated that if the former colonial power, Britain, failed to provide funding to finance compulsory land acquisition, the land would be taken over without compensation. As we know, the new constitution was decisively rejected by a national referendum in February, so the ruling party hurried through a constitutional amendment to the existing (1980) constitution to the same effect just before Parliament was dissolved.

The long-simmering dispute over land had little to do with the economy's deepening difficulties. Nevertheless Zanu-PF political strategists decided that the party's best, if not only, chance of winning the forthcoming parliamentary election was to make land reform the central plank of its election manifesto with the slogan, "Land is the economy, the economy is land".

The land invasions, which started immediately after the government's defeat at the constitutional referendum, were seen initially as a method of punishing the farmers for their opposition to the new constitution and their support, including finance, for the MDC. The invaders became the government's brownshirts used, mostly in rural areas, to intimidate voters. While they ensured a narrow government victory, the party - and its slogan - was conclusively rejected at the polls throughout urban areas and in Matabeleland Zanu-PF was virtually wiped out.

Despite warnings from all sides of the likely impact on the economy of the land invasions and the post-election "fast track" land reform programme, now expanded to cover 3,270 white-owned farms, Mugabe has clearly staked his party's presidential election hopes in April 2002 and his own political reputation on land.

With commercial agriculture accounting for at least 10 per cent of GDP, employing a quarter of formal sector workers (360,000 people) and contributing upwards of 35 per cent of total exports, the takeover of 3,270 farms - over half the commercial farming area - will have a devastating economic impact. Worse, if, as seems all too likely, the programme takes the form of dumping settlers on commercial farms without basic infrastructure, agricultural extension services or credit, the dislocation will be even greater. The CFU estimates that the takeover will result in a 43 per cent decline in output over four years, though this would be offset by increased production by the resettled farmers. The net effect, however, would be a 25 per cent fall in output, while net exports would decline by a simailar amount and 150,000 fewer people (45 per cent) would be employed on commercial farms.

It is not fanciful to predict a 30 per cent decline in real GDP over a period of two to three years, should land be resettled in such a way. Not only that but the collapse of law and order in the run-up to the election (some 1,600 farms were invaded) has written Zimbabwe out of any aid or foreign investment script. The longer the process continues, the more difficult it will be for an MDC president elected in 2002 to rebuild the economy.

Speculation, particularly in the South African media, that Mugabe will be ousted by a palace revolt, overlooks the fact that, short of a military coup, a change in the presidency, can only come about through elections. If the so-called technocrats and moderates included in the new cabinet wish to get rid of Mugabe, they would run the risk, many would say certainty, of losing an early presidential election to the MDC's Morgan Tsvangirai. Zanu-PF and Mugabe are stuck with each other in a loveless marriage, at least until 2002

Nor does Mugabe show any sign of softening. In his relatively low-key address on Heroes' Day last month, he ended his speech on a note of obvious challenge to those moderates within his party who might think of opposing him. Those who are not with me, he warned ominously, are against me.

On the surface then, there is no way out before April 2002. But two events could change this assessment: first, the MDC is challenging upwards of 20 parliamentary contests that it lost in June. If a sufficient number of these were to be overturned in the courts in September and the MDC were to win the subsequent re-runs, Zanu-PF could lose its overall parliamentary majority. For this to happen, however, the MDC would have to win some 18 by-elections, which seems unlikely. Second, the economic crisis could gather sufficient momentum in the months ahead to force enough Zanu-PF MPs to put country before party and cross the floor. If the past is any guide, this too seems highly unlikely, but as it becomes increasingly evident that land resettlement, far from reviving the economy, is actually destroying it, this must be a possibility, albeit one with a relatively low probability

As the weeks go by, the MDC's options are narrowing. Its stated policy on land reform and rural development - the two are twinned - involves setting up a land commission to acquire under-utilised and derelict land and also to implement a policy of one farmer, one farm. It promises a land tax on under-utilised land to help fund the programme along with support from donors. It is committed also to freehold title for small-scale farmers. The danger is that if the 3,270 farms are taken over before the 2002 presidential election, as the government intends, the damage will by then be irreversible.

Even sound land reform is not going to create enough jobs for Zimbabwe's 1.5 million unemployed or over one million under-employed. In the medium-term, if farm productivity is to increase, Zimbabwe's agricultural sector will support fewer, not more, people on the land. Land resettlement may be a necessary strategy for reducing inequality, but it is unlikely to be a viable strategy for self-sustained economic growth.

On top of this, according to UNAids, with an infection rate of 25 per cent of the adult population, Zimbabwe is the world's second most seriously affected country after Botswana. Aids will have a number of adverse effects on the economy - reducing the country's growth potential, forcing government to spend two or three times as much on health and social services as at present, and creating serious skills shortages. Already, population growth has slowed from 3 per cent annually in the 1980s to a projected 1 per cent a year in the first five years of the 21st century.
No one yet knows how Aids will impact on the economy, but it is clear it will reduce the capacity and resources of government to finance and organise land reform programmes. It will also reduce, to an unknown extent, the land hunger pressures for resettlement.

Against this background, land reform will not reverse Zimbabwe's disappointing post-independence economic track record - GDP growth of 2.7 per cent annually against estimated population growth of 3 per cent so that living standards have fallen. At best it could make both a partial and a long-run contribution to development. At worst it could be to Zimbabwe's economic future what the nationalisation of Zambia's copper mining industry was to that country - economic suicide.

Tony Hawkins is professor of business studies at the University of Zimbabwe.