Real inflation 3000%?

‘The collection of clowns who run the country, simply do not know what to do’


BULAWAYO - On two sectors of the

t=”on”>Zimbabwe economy seemed to have survived Zanu (PF) – the mining and financial services sectors. Now both are threatened.

In the mining industry, once you have made an investment in a hole in the ground, you are locked in – nothing much you can do about it except keep on digging or close it down to come back later at huge expense or simply walk away.

An Australian firm saw the massive potential of the platinum reserves in Zimbabwe and sunk US$600 million into a hole near Chegutu. They built a complete town of houses for staff and a huge processing complex, roads were opened up and hundreds of staff recruited. Three years later – they walked away and a small group of local investors bought the whole bang shoot for a small payment – taking over what debts remained.

Anglo American – one of the largest mining companies in the world and at one stage holding nearly half of all the counters on the stock market, has quietly disinvested over the past 15 years. At one stage they were into everything – chrome, steel, coal, nickel and a wide swathe of industry and agro industrial firms. Now they operate out of a house in Harare and have a handful of investments and retain only their platinum mining assets – still in their embryonic state. They sold everything else – to whoever would buy the assets for a reasonable price.

The South African mining giant Implats eventually bought the Chegutu operation from our local investors (who made a fortune on the deal) and announced a massive investment programme. Another South African mining company (a company with black empowerment links) bought into the gold industry. Now they are all wondering why they did such a dumb thing – Zanu (PF) has moved to do what they have done to all other sectors, get involved and destroy what is there.

After years of deliberation the Ministry of Mines made it known they were going to take a 25 per cent stake in all major mining companies – without compensation. In addition the same companies had to sell another 26 per cent on the never never to either the State or a local black empowerment group (read Zanu (PF) company in effect). Thus at one stroke they take over a controlling interest in all major mining companies. This goes well beyond anything being done in South Africa and it violates clear, solid legal agreements entered into with companies prior to their entry to the industry – especially in the platinum sector.

The industry has reacted with fury. At a meeting this week with the Minister they spelled out what would happen – they would freeze all new investment and all major maintenance. Output would start to decline in a short while and thereafter would decline rapidly with mine closures being inevitable. They also pointed out that as the principle stakeholder – the State or its local partners would have to find the resources for any major investment and if these involved hard currency, they would find it very difficult to do so.

The other sector that has survived (battered and bruised, but still operating) is the financial services industry. We have a good national network of banks and other financial institutions that are basically well run and sound. Now the state has imposed huge statutory reserve requirements on the remaining commercial banks – six have gone to the wall in the past four years. But to compound the problem, the new reserves have to be paid to the Reserve Bank in US dollars!

A local colleague of mine now estimates inflation at 3000 per cent per annum – and rising. Certainly this week the increase in prices has been scary. In this environment, if you do not watch what you are doing very carefully, you simply go bust. One thing that we do know is that Zanu (PF) and the collection of clowns who run the country, simply do not know what to do – from the evidence of their action in the past week, they are now committed to a process of self-destruction.  It cannot come soon enough.


Post published in: Economy

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