A self-taught Marxist, Mugabe is an unlikely candidate for sudden conversion. His government has paid lip service to liberalization in the past, privatizing state assets and extending a grudging welcome to multinationals. Now, however, a plunging currency and 200 percent inflation have destroyed much of the industry developed since Mugabe led the drive to independence in 1980. More than half Zimbabwe’s commercial farmland lies fallow in the wake of his grab for the property of white farmers. Senior military and ruling ZANU-PF officials are openly restive. In January, Army Commander Vitalis Zvinavashe declared: “We must admit there is a crisis. It is not right to keep quiet and let nature take its course.”
Since then, the regime has adopted a series of reforms favored by business. First, it slashed the preferential exchange rate for exporters from 150 Zimbabwe dollars to the U.S. dollar down to 800 Zimbabwe dollars–exactly the level business had asked for. A fortnight later the government hiked its subsidized fuel prices by 95 percent, bringing them closer to market rates. Last week the regime promised to implement anti-corruption rules drafted in 2000–rules that could hurt Mugabe acolytes but would help create a stable business environment.
Why the change now? Zimbabwe was suspended from the Commonwealth for irregularities in last year’s presidential election, and to get back in, Mugabe needs to show his country is on the mend. Instead, 6 million rural people are facing starvation. Refugees flock to the borders. Foreign reserves are near empty. There is little cash to import fuel. Long lines form at gas stations hours before they open.
The pressure is on. Presidents Thabo Mbeki of South Africa and Olusegun Obasanjo of Nigeria have been urging Mugabe to reform or retire. Britain, the United States and the European Union last week imposed new economic and travel sanctions on the president and his ministers. Even Mugabe’s greatest African patron, Muammar Kaddafi, is warming to the West, cutting the flow of cheap oil and investment largesse to Zimbabwe.
Increasingly isolated, Mugabe has endorsed reform only by his silence. Just last year, when Finance Minister Simba Makoni called for a weaker exchange rate, the president dropped him from the cabinet as an “enemy of the state.” Last month Makoni’s successor simply ordered the Reserve Bank to devalue while Mugabe was in Paris attending the Franco-African summit. The bank hastily obliged.
Mugabe’s quiet amounted to a stay of execution for exporters, who had been risking prosecution by trading on the black market, where a U.S. dollar buys 1,500 Zimbabwe dollars–about 10 times the old official rate. Before the devaluation, says a top civil servant, platinum and tin mines–the largest export industry after tobacco–were on the verge of closing. For a government that had previously made only limited concessions, under duress, one sector at a time, devaluation was welcomed as a fair reform that affects all businesses equally.
All over, the old vendetta against business seems to be easing. Since the farm seizures began two years ago, industrialists have worked to distinguish their interests from those of Zimbabwe’s beleaguered white farmers. The backbone of the economy, commercial farming dominated constitutional talks at independence, when farmers were guaranteed seats in Parliament and the cabinet–a privilege not extended to other industries. The new willingness to engage with other industries has raised hopes that ZANU no longer sees all private companies as “forces of imperialism.” For white farmers, however, it’s too late. At 78, Mugabe craves a legacy as the leader who gave Zimbabweans back their land; there are very few farms left in white hands.
International investors are intrigued but not impressed. Foreign banks such as Britain’s Barclays and South Africa’s Stanbic, mining giant Anglo American, and British American Tobacco have shelved new investments but stopped short of leaving. Last week the board of Dublin-based African Gold refused to pour more money into its Zimbabwe mine, so chairman John Keeling opted to pay for replacement parts himself. Despite his faith in Zimbabwe’s “great future,” even Keeling predicts things will get worse before they get better–no matter who is running Zimbabwe.
