We should not forget the fact that when competing Zimbabwean liberation movements combined forces to displace the colonial government, they were sponsored, trained and equipped mainly by China and the Soviet Union, usually in training camps that were set up by Chinese or Soviet personnel in neighbouring countries.
These liberation movements also received material support from North Korea, Cuba and Yugoslavia, so when they took office, they were already beholden to their mentors. They obligingly claimed to have firm beliefs that the Zimbabwe of the future should be run on communist lines. When Robert Mugabe announced in 1980 that the country was now a Marxist-Leninist state, among his firmest friends were the leaders of the People’s Republic of China as well as Marshal Tito, Fidel Castro, Kim Il Sung, Nicolae Ceaucescu, Erich Honecker, Colonel Qaddafi and Colonel Mengistu.
Mugabe’s expressed intention was to do what they had done – bring all business sectors under State control. And he looked to them for inspiration and support because they did not share the Western countries’ annoying habit of being critical of him for alleged human rights abuses.
So, with frequent mentions of his concern for the “toiling masses”, Mugabe launched his mission to reward his supporters. I have to return to that dominant theme because it explains so much. He started by working on so-called wealth redistribution plans, which he initiated with generous subsidies to keep staple food prices low, strict price controls to keep all other goods affordable, accelerated pay increases to all employees below management levels and a salary freeze for all management and senior business people.
Then he imposed higher tax rates and a few new taxes, he imposed limits on local bank finance for all foreign-controlled businesses and restrictions on the proportion of after-tax profits that could be declared as dividends. Existing controls were tightened on rents, exchange rates, imports, interest rates, dividend remittances and project approval procedures that had been imposed by the previous Rhodesian government.
Then, to reduce the new government’s need to depend on the now alienated business sector for its funding, aid was sought from every possible donor country.
Next, the party leadership directed its energies into the challenge of fully indigenising the whole public sector. All non-indigenous state employees were invited to take early retirement. Those who chose to stay were told that their prospects of promotion had come to an end.
More rapid promotions thus became a component of the wealth redistribution process and many loyal party supporters with no experience in public administration suddenly found themselves in senior civil service positions.
These wealth redistribution and reward schemes were so well publicised that large numbers of people, who all considered themselves to be deserving of special recognition for their loyalty and support during the liberation struggle, kept presenting themselves to the authorities to lodge entitlement claims and to collect on the promises being made.
Mugabe had already rewarded the most important of these by making them Cabinet Ministers or MPs, Politburo and Central Committee members, diplomats, senior civil servants or senior officers in the uniformed services, and some were made chief executives or directors of parastatals.
However, thousands of others still awaited their rewards. By then, the best of the possibilities were seen to come from the business sector, over which the government was wielding considerable power, having inherited a wide range of controls from Rhodesia’s siege economy days.
Businesses were forced to seek project approvals for any significant changes and permission was also needed for company mergers or sales, and permission was often denied unless concessions were made that looked attractive to the politicians. For sales of farms, government required that all properties be offered to them first.
These measures provided government with the means to reward a few more supporters. Some were given directorships of companies and others were given farms, allowing government to boast of progress on the promised redistribution of land. But thousands still remained unsatisfied. Government then realised that many more transfers of considerable value could be made in the form of allocations of foreign currency. Rhodesia had managed its scarce foreign exchange resources during fifteen years of international sanctions by rationing its limited foreign earnings to ensure that only the most efficient and productive importers would receive the funds.
Mugabe inherited the whole system and kept it going, but he saw the transfer of these allocations of foreign currency, plus their accompanying import licences, to be an easy way to achieve several important objectives.
Firstly, the allocations and import licences would handsomely reward his supporters, and secondly, by redirecting access to the funds into the hands of loyal supporters, wealth-generating capacity would be transferred away from mainly white industrialists to selected indigenous people.
As these chosen beneficiaries would remain dependent on his patronage for regular instalments, Mugabe felt he was not only securing their continuing loyalty, but that the transfers would start towards the promised indigenisation of the economy. His comment at the time was that the new recipients of scarce foreign currency would become the industrialists of the future.
Unfortunately for governments everywhere, people who successfully claim that they are entitled to support tend not to be very productive. With very few exceptions, the Zimbabweans who received allocations of scarce foreign currency found that the easiest way to profit from the allocations was to simply sell them at an attractive premium.
This premium soon settled at 100 percent of the face value of the back-to-back allocation and import licence, so the allocations became a very good income that required no business knowledge and no hard work.
Having successfully claimed the pay-outs as an entitlements, they relaxed and enjoyed a steady flow of funds. As a result, most of these beneficiaries of government’s wealth transfer process did not become industrialists. A few became importers and sellers of finished goods, such as motor spares or electronic equipment. The rest sold their foreign exchange and import licences back to the companies from which they had been taken, so the industrialists who were running the factories before paid twice as much for their imports, but remained in business because import licences were never granted for the goods that Zimbabwean factories could make. – Part 2 next week: Not all Zanu (PF) policies in the 1980s failed.
Post published in: Analysis