Saturday, July 14, 2007

Drifting onto the Rocks and Burning the Boat

July 12th, 2007

“Drifting onto the Rocks and Burning the Boat”

Yesterday the regime published in the state press the list of those products
that are to be controlled at a fixed price. It covers all the basics from
milk to cement. The prices shown are between 20 per cent and 50 per cent of
the actual cost of producing and marketing those products. All other
products produced by manufacturers are now price controlled in that the
producer must fix their current prices at the level they were 3 week ago
(18th June) and must from now on get the written approval of the Minister
for any new prices.

June the 18th marks the start of this campaign. On that date they entered
the parallel market for foreign exchange using billions of dollars in local
currency just printed, driving the price of foreign exchange from about 100
000 to 1 for the US dollar and 7500 for the Rand (the two most frequently
traded currencies) to 300 000 to 1 or more; some trades were done as high as
400 000 to 1 for the US dollar and similar sorts of rates for the Rand.

As a consequence, since all imported items are priced at the replacement
cost in foreign exchange at the parallel market rate, prices rose across the
board. This pushed inflation well over the 15 000 per cent per annum level
and created all sorts of pressures in the local economy.

When the exercise stopped after 10 days or so (I assume they ran out of
cash), the foreign currency rates fell back to about 200 000 to 1 for the US
dollar and 15 000 to 1 for the Rand. Many prices were adjusted downwards
(fuel from 180 000 for a litre to 120 000) and business went back to
"normal". They then unleashed the next phase.

This second phase is now well under way and is expressed in the wholesale
arrest of business managers and Directors (nearly 2000 as of last night),
the physical control of prices by thousands of Police and Militia -
operating for the first 10 days without any legal backing at all and now the
promulgation of new regulations that are just plainly unworkable.

Just take what they did yesterday to the beef industry. They had fixed the
retail price of beef (for all cuts) at an arbitrary 90 000 or 120 000
dollars a kilogram (why the difference no one can tell me). In Beitbridge we
were forced to sell our stocks at 90 000, in Masvingo, just up the road,
they were forced to sell at 120 000. It did not matter really, just changed
the degree of your losses. When the final rush of customers was over we had
run out of stocks, lost many millions of dollars and could not find any
farmers who would sell us cattle at a price that would allow us to operate
at the new prices.

So what do they do? Yesterday they cancelled the licenses of ALL private
abattoirs across the country, hundreds of them. In their place, they
"instructed" farmers to approach their nearest Cold Storage Commission
abattoir to make arrangements for them to buy their cattle, slaughter them
and deliver meat at the "controlled" price to butchers.

Now I was the Chief Executive of the CSC when it was the largest meat
processor in Africa. It has a superb network of 5 internationally registered
Abattoirs capable of slaughtering up to 650 000 head of cattle a year. We
actually handled over 700 000 head in one year during a drought.

We no longer have that sort of industry, but still kill between 350 000 and
400 000 head a year. The CSC however is hardly a player. Two of the
abattoirs have not killed an animal for 15 years, the others are on a care
and maintenance basis with a tiny throughput. You seldom see a CSC truck on
the roads and they are almost moribund.

Now, at the stroke of a pen, the Minister thinks he can order the closure of
hundreds of small abattoirs that have taken the place of the CSC, open up
the CSC works and supply the country overnight with its needs. If ever you
needed to understand the extent of the stupidity of these so-called
Ministers, this is it, and Mad Made is not even the Minister of Agriculture
any more! When I was at the CSC we handled up to 140 000 tonnes of beef a
year, exported to many countries including the EU and employed 5000 people
with dozens of excellent engineers, accountants and managers - most with
more than 20 years experience. That is all long gone, they do not have the
physical, financial or management capability to undertake this exercise
thrust on them at a days notice.

Yesterday we closed down our clothing factory in Bulawayo and told the staff
to go home and come back next week when we might know what to do. The
reason, all our orders from local retailers have been frozen - they simply
cannot function under the new regulations. If there is no movement in a week
or so, they will halt all buying and run down their stocks and then, like
us, close down. We are affected immediately as we hold no stocks of finished
goods - we manufacture to order.

When existing stocks of controlled items run out there will be nothing left.
That includes all the basic essentials - salt, maize meal, flour, matches
and meat. When I wrote over the weekend about refugees flooding into South
Africa I do not think I overstated the probabilities. I now have no doubt at
all and all of us may be the new victims. What kind of reception will we

I heard talk in Beitbridge yesterday that the South African Army has just
shot 100 head of cattle straying into South Africa across the River. I also
heard disturbing reports that they had shot 7 "border jumpers". It may or
may not be true, but it does describe in graphic terms the sort of reception
poor, homeless, impoverished and desperate Zimbabweans get when they try to
escape to anywhere where sanity prevails.

As for the crazy guys at the helm here, they know their Zanu PF ship is
headed for the rocks of destruction in the SADC talks and their aftermath,
they have opted to burn the boat rather than face the music. The problem is,
we are all in this particular boat - not out of choice but simply historical
reality. If they are allowed to burn the ship around us like this, we have
no option but to take our chances in the water and swim to shore.

Do not think these Zanu PF guys are irrational or dumb. This is carefully
planned and is being ruthlessly implemented. Just the same as Murambatsvina
and at the same time we must recognise that they think they have a chance of
success, even if it is small and their commitment to the SADC process is
nil. Theirs is a plan to fight to survive and if they fail to leave nothing

Eddie Cross

A Warning

7th July 2007

A Warning

I hope nobody thinks that next week will be business as usual. This week the
private sector has gradually wound down its operations. The retail sector -
most retailers carry stock for a month approximately, are the last to shut
down but already you can see empty shelves and shortages of all the fast
moving basic items are now widespread.

Butcheries and bakeries that work on stock levels of about a week are
already closed as their stocks ran out. The same with filling stations.
Manufacturers must work with quite significant stock levels - especially of
imported items and they will run these down and then close unless there is a
U-turn on the part of the government and new directives which are half

There are no signs as yet as to what the State will do when this shutdown
occurs. But all that we are seeing and hearing right now are threats and an
insistence that this situation is going to be maintained for some time.

The most immediate problem is the very basics - fuel for transport and the
essential foods, maize meal, rice, bread, meat and milk. By Monday all of
these will be virtually unobtainable. Farmers with pigs and poultry are
pondering what to do with their animals as they run out of stock feed, dairy
farmers also face huge problems as they cannot pay their feed bills and must
start winding down - how do you tell a cow in milk, used to being milked
three times a day, that she must stop producing?

Hundreds of thousands of workers and non-formal sector businesspersons are
being faced with no work and are being forced to stay home - at present on
full pay, but in a few weeks what then? There is no law to turn to; there
are no political leaders to go to with any sort of sense and authority. We
are in the hands of a madman who has nothing to loose but his life and has
his back to the wall and is using the only tools that he knows to try and
stay afloat while the country drowns.

How will the average Zimbabwean respond? Friends of mine are doing a day
trip to Francistown in Botswana - just 200 kilometers away, today. They will
buy what they need for next week and return. A few will do the same. Others
are going on holiday, unable to stand the specter of seeing all that they
have built up over the past decades swept away. They are the lucky ones -
what about the rest?

There is only one way out and that is across the Limpopo. I must warn South
Africa that they will now face a huge upsurge in economic refugees and they
had better brace themselves for that if nothing effective is done to halt
this madness. I mean hundreds of thousands of new, desperate, hungry
Zimbabweans flooding in and disappearing into the vast urban slums that
surround all South African cities.

The alternative is a military coup led by the junior officers with the
compliance of some in the ruling Party who see that this situation is not
sustainable and that it is creating a regional crisis of substantial
proportions. Such an event would close the door to the SADC process under
way today in South Africa and plunge the country and the region into a huge
political crisis that would require military intervention. Am I being
alarmist? I do not think so. The actions of this rogue regime in the past
week have been enough to tip us over and into a state of crisis we have
never faced before.

Irreparable damage is being done to the country and if this is not stopped
in its tracks by immediate and radical measures taken by regional
governments very serious consequences are going to follow.

The humanitarian and economic crisis that is about to break out in Zimbabwe
is simply staggering and certainly way beyond the capacity of the country to
handle on its own.

Eddie Cross